Mutual Fund is one of the most common investments in India. SIP refers to Systematic Investment Plan and it is indeed like a metaphorical SIP to get profits. In this article, we will try to explore the SIP route for Mutual Fund investments for NRIs in particular.
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 very convenient to do from your desktop or mobile.
- Rupee Cost Averaging: You buy units when the market is low or high, averaging out your risk as well as your returns.
- Power of Compounding: The opportunity of significant over a period of time (say 10 or 20 years).
- Higher Return than Deposits: 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 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 SIP | Fixed | Monthly | Investors with disposable income |
| Top-Up SIP | Increase in regular SIP | Monthly | Investors with regular hike |
| Flexible SIP | Amount you can invest | Monthly | Investor with inconsistent income |
Investment tools for NRIs
There are two ways to invest in Mutual Funds 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. If you do not have any of these accounts, you can pen one by applying and submitting your documents and completing your KYC as an NRI.
Process of Investment
In order to invest in Mutual Funds, NRIs must be registered with a Registered Transfer Agent (RTA). These RTAs maintain a detailed record of Mutual Fund Investors. Several wealth management services and digital platforms can help you register and handle your KYC 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
Online Mutual Fund KYC for NRIs is a seamless online process through which NRIs can easily complete their KYC to start investing in Mutual Funds. There are documents required in order to register successfully:
- Completely filled and signed KYC Form
- Identity Proof: Passport and PAN Card
- Address Proof: Mandatory for NRIs
- In Person Verification Process: The verification is done for NRIs by a certified entity for the acknowledgment of the fact that the investor has all the original documents mentioned in the KYC Form.
- Major agencies have their mobile apps for instant authentication through biometrics or OTP.
- The video call might include questions about the details you have filled in the form.
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 Fund: An equity fund is a mutual fund that invests principally in stocks.
Debt Fund: A debt fund is a mutual fund that invests in fixed-interest generating securities such as corporate bonds, government securities.
| Nature of Profit | Equity Funds* | Debt Funds* |
|---|---|---|
| Minimum Holding Period | 1 year | 3 years |
| Short term capital gain | 15% + 4% cess* = 15.60% | As per the tax rate |
| Long term capital gain | 10% + 4% cess = 10.40% (if long-term gain exceeds Rs 1.25 Lakh) | 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)
SBNRI is an authorized Mutual Fund Distributor platform & registered with the Association of Mutual Funds in India (AMFI). ARN No. 246671. NRIs willing to invest in mutual funds in India can download the SBNRI App to choose from 2,000+ mutual fund schemes or can connect with the SBNRI wealth team to better understand Mutual Fund investments.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions. SBNRI does not intend to predict future returns, please read all related documents before investing.
