SIP for NRIs: How can NRI invest through SIP in a Mutual Fund?

Mutual Fund is one of the most secure and sort after investments in India. SIP refers to Systematic Investment Plan and it is indeed like a metaphorical sip of profits. The less risk market is wide open for investments from both Indian Residents as well as NRIs. In this article we will try to explore the SIP route for Mutual Fund investments for NRIs in particular.

In this article, we will cover:

SIP for NRIs: How can NRI invest through SIP in a Mutual Fund?
SIP for NRIs: How can NRI invest through SIP in a Mutual Fund?

So, before NRIs would invest their money in this plan, they would like to know what exactly it is and how it operates. A SIP or Systematic Investment Plan is a payment of a fixed amount made at regular intervals for any investment opportunity such as Mutual Funds etc. There are certain benefits that make it the go-to investment medium, which are:

Benefits of SIP

  • Convenience: SIP is one of the most convenient ways to invest in a mutual fund as it provides flexibility
  • Rupee Cost Averaging: The benefit of buying units when the market is low reducing your overall investment cost eliminating the need to time the market
  • Power of Compounding: The benefit of exponential growth in long term returns compared to a one time investment
  • 2X Higher Return than RDs: An efficient way to beat inflation and  get higher returns compared to conventional FDs/RDs

Understanding the benefits of SIP as an investment model for Mutual Funds makes it a very efficient and comfortable way of achieving financial goals. Another aspect that adds to the benefits mentioned above is the availability of multiple choices. There are various types of SIP that NRIs can choose from while investing:

Types of Mutual Fund SIPs

Types Amount of Investment Interval of Investment Preferred choice for
Regular SIPFixedMonthlyInvestors with regular income
Top-Up SIPDefault amount Fixed. Can be increased on regular basisMonthlyInvestors with regular income and regular hike
Flexible SIPFlexible (Can be increased, decreased or stopped)MonthlyInvestor with inconsistent income

Now, we know what is SIP and NRIs can invest in SIP to capitalize on the benefits that it offers. But a doubt can still persist which is how NRIs can invest in SIP. What are the mediums that enable them to do so? The next segment covers this aspect.

Investment tools for NRIs to invest in SIP

Majorly there are two tools for any basic NRI investment in India, which are:

  • Non Resident External (NRE) Account: To invest on a repatriable basis
  • Non Resident Ordinary (NRO) Account: To invest on a non-repatriable basis

An NRI can invest in Mutual Funds In India using the above mentioned accounts Now we need to understand the process of investment in these mutual fund SIP through these accounts.

SIP for NRI

Process of Investment in SIP for NRIs

In order to invest in Mutual Funds, NRIs must be registered with a Registered Transfer Agents (RTAs). These RTAs maintain a detailed record of Mutual Fund Investors. There are a number of wealth management services and digital platforms that can help you get registered and handle your KYC (Know Your Customer) requirements for a smooth investment experience.

The top RTAs in India for Mutual Fund Investments are CAMS (Computer Age Management Services) and Karvy.

Online Mutual Fund KYC for NRIs

Online Mutual Fund KYC for NRIs is a seamless online process through which NRIs can easily complete their KYC requirements for Mutual Funds by submitting the documents online and verifying them through In Person Verification (IPV).  

There are various documents that are required in order to register successfully:

  • Completely filled and signed KYC Form
  • Identity Proof: Passport and PAN Card (Self-Attested)
  • Address Proof: Mandatory for NRIs. (Includes both correspondence and overseas address)
  • In Person Verification Process: The verification is done for NRIs by a certified entity for the acknowledgement of the fact that the investor has in his/her possession, all the original documents that he/she has mentioned in the KYC Form. It can be done by the following process:
    • The IPV can be done seamlessly on a video call (Skype, Appear.in etc.). Earlier, NRIs were required to visit the offices or someone visited the investor to verify the papers at their home or workplace
    • You can set a time for the video call with the agencies and carry on with the IPV. Only the following entities have the authorization to carry out IPV:
      • KYC registration agency (KRA) 
      • The AMC (Asset Management Companies in India) Mutual fund agent 
      • Mutual fund distributor or advisor 
      • MF’s registrar transfer agent like CAMS or Karvy
  • Major agencies have their mobile apps now for instant authentication through biometrics or OTP
  • The video call might include questions about the details you have filled in the form and the application can be cancelled if any contradictions occur

So, now we know the what and how of SIP investments for NRIs in Mutual Funds in India. But, one of the major aspects that we still need to understand is the taxation that is associated with SIP investments in India. The next segment will guide you through the same.

Everything you need to know before investing in NRI Mutual Fund

Mutual Fund Taxation for NRIs

Different types of Mutual Funds are taxed differently and in case of NRIs the taxes are deducted at source

*(Equity Funds: An equity fund is a mutual fund that invests principally in stocks)

*(Debt Funds: A debt fund is a mutual fund that invests in fixed-interest generating securities such as corporate bonds, government securities)

Nature of Profits / Income Equity Funds* Debt Funds*
Minimum Holding period for Long term capital gains1 year3 years
Short term capital gains taxation15% + 4% cess* = 15.60%As per the tax rate of the investor (30% + 4% cess = 31.20% for investors in the highest tax slab)
Long term capital gains taxation10% + 4% cess = 10.40% (if the long term gain exceeds Rs 1 Lakh)(long term gains up to Rs 1 Lakh is tax-free) 20% with indexation*

*(Cess: A cess is a tax on tax that you pay to the government for purposes set by the government. The cess is charged till the objective set by the government is fulfilled. Eg: Krishi Kalyan Cess, Swachh Bharat Cess etc.)

*(Indexation: Indexation refers to the technique of adjusting income payments using a price index to maintain the purchasing power of the public after inflation) 

In this article, we tried to address the major doubts that NRIs have with respect to SIP investments in Mutual Funds in India. To get a detailed Mutual Fund Advisory from experts at SBNRI, click on the button below and contact us.

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