How can NRI invest in mutual funds in India?

The Indian stock market is a great opportunity for NRIs to grow their wealth back in India. Although NRIs can invest in stocks directly if they have the expertise, investing through mutual funds is a smart and cost-effective solution for all types of investors. In this article, we will analyze how can NRI invest in mutual funds in India, along with the process and regulations. 

How can NRI invest in mutual funds in India?
How can NRI invest in mutual funds in India

Also Read: Things NRIs should keep in mind when investing in Mutual Funds

Can NRI invest in mutual funds in India?

While many NRIs are putting money in the Indian market, some people still ask can NRIs invest in Indian mutual funds? Yes, Non-Resident Indians (NRIs), Persons of Indian Origin (PIOs) and Overseas Citizens of India (OCIs) can invest in stocks and mutual funds in India if they adhere to rules mentioned under the Foreign Exchange Management Act (FEMA). However, some mutual fund houses don’t accept mutual fund applications from NRIs based in the US and Canada due to the tedious paperwork required under the Foreign Account Tax Compliance Act (FATCA)

Top 3 Mutual Funds for NRIs to invest in 2021

What are the benefits of NRI investment in mutual funds in India?     

Mutual funds are one of the prominent financial instruments for NRI investment in India. Let’s look at some of the benefits NRIs can get by investing in mutual funds in India. 

Several schemes

NRI mutual fund schemes are designed to cater to the diverse and varied needs of NRIs. Basically, there are three categories for NRI investment in mutual funds in India – equity funds, Debt funds, and hybrid funds. Equity funds are the mutual funds that primarily invest in stocks, also known as equity securities. Debt funds are the mutual funds that invest in bonds or other debt securities, such as government bonds, commercial papers, treasury bills, etc. Hybrid funds, also known as balanced funds, invest in both equity and debt instruments.  

Easy to buy and manage funds online from anywhere

NRIs can buy and manage mutual funds online from anywhere in the world. NRIs can buy and redeem mutual funds online using their NRI accounts. In addition, investors can switch units of different mutual fund schemes and opt for systematic transfer or withdrawals online. You don’t need to submit cheques and DD, or be physically present in India. You can track your funds online and receive consolidated account statements regularly on mails. 

Portfolio diversification

Generally, NRIs disproportionately invest in fixed-return assets like bank FDs, gold and real estate. So, NRI investment in mutual funds, ETFs, direct equity, etc. is a smart choice in terms of portfolio diversification and income generation. Mutual funds invest its fund into various financial instruments including equity shares and fixed income instruments. Investors can enjoy the benefits of diversification by investing in mutual funds in India. 

Also Read: 5 Common Mistakes NRIs Make When Investing in India

Scope for more profits from rupee appreciation 

If the value of INR appreciates against the currency of the country of your residence, it will generate more profits for you. For example, if a US-based NRI invests 1000 USD in a mutual fund in India at an exchange rate of Rs. 75 to 1 USD, the NRI will receive good returns if the INR appreciates against the USD. 

NRI investment – the procedure

Set up an account

As per the Foreign Exchange Management Act (FEMA), NRIs can’t park their money in regular savings account in India. Once you attain NRI status, you are required to open an NRI account to conduct financial transactions in India. Based on their requirement, NRI can choose between NRE and NRO accounts.   

NRE account: An NRE account is well suited for NRIs who want to save and manage their foreign earnings in India. Funds in an NRE account are fully repatriable out of India.

NRO account: NRIs can open an NRO account to manage their Indian and foreign income. However, money in an NRO account can’t be repatriated easily. 

Get your KYC done

To invest in mutual funds in India, an NRI must complete the KYC process. Here are the steps you need to complete for NRI investment in mutual funds in India:

  • KYC form: You need to submit the fully filled KYC form to the SEBI registered intermediate. You can submit the KYC form and documents by courier/ post. 
  • Documents: Documents to be submitted for mutual fund investment are as under:
    • Overseas address proof
    • Indian/ domestic address proof
    • A copy of your passport
    • Recent photographs
    • Copy of PAN card
    • Bank statement

Merchant Navy staff must submit a mariner’s declaration or certified copy of the CDC (Continuous Discharge Certificate).

  • Attestation: Get your KYC documents attested from any of the following authorities: authorized officials of overseas branches of scheduled commercial banks registered with the RBI, judge/ court magistrate, Public Notary, or the Indian Embassy/Consulates in the country of your residence. 
  • In-Person Verification (IPV): In-person verification is a mandatory step for investment in mutual funds for NRI. You can connect to the official representative of the mutual fund house to complete the process via video conferencing. 

As already mentioned, only a few mutual fund houses in India accept mutual fund applications from NRIs based in the US and Canada due to the FATCA. So if you are an NRI from these countries, then look into the additional document requirement also.

Mutual fund houses that accept NRI investment in India from NRIs based in the US and Canada are as under:

  • Aditya Birla Sun Life Mutual Fund
  • L&T Mutual Fund
  • SBI Mutual Fund
  • UTI Mutual Fund
  • ICICI Prudential Mutual Fund
  • DHFL Pramerica Mutual Fund
  • Sundaram Mutual Fund
  • PPFAS Mutual Fund

Investment procedure

You can use any of the following to invest in mutual funds for NRIs: 

  • Self or direct investment: Manage your investment portfolio yourself. You can use your NRI account to start investing in mutual funds in India. Collect copies of the mutual fund KYC forms from the portal of a mutual fund company. Alternatively, you can visit the Indian Embassy in the country of your residence to complete in-person verification.  
  • Power of Attorney (POA): NRIs are allowed to mandate another person to invest on their behalf. For this, you have to submit a Power of Attorney (POA) letter to facilitate transactions made by the person you have mandated. This option is ideal only if you trust someone. 

How to Redeem?

Redemption procedure varies from AMC to AMC. Mutual fund investment can be redeemed by following the redemption procedure mentioned by the respective fund house. The mutual fund house will credit the corpus (investment + gains) you are supposed to get after fund redemption to your account post deduction of applicable taxes. The proceeds will be credited to the respective NRE or NRO bank account of the investor. You can receive a cheque for the same. 

NRI Investment in Mutual Funds | Expert Advice | Portfolio Services & Recommendations

Before investing in the Indian market, NRIs must consult market experts to make informed decisions. At SBNRI, we always strive to simplify NRI investment in India and hence have partnered with AMCs and banks. You can get detailed mutual fund advisory from experts at SBNRI. You can download SBNRI App from the Google Play Store or App Store to ask any questions related to mutual fund investment, NRI account opening online and tax filing in India. To ask any questions related to Mutual Funds, click on the button below. Also visit our blog and YouTube channel for more details. 

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