Unlike NRIs from other countries, USA/Canada NRIs are faced with certain cumbersome compliance requirements under FACTA (Foreign Account Tax Compliance Act) to invest in mutual funds in India. Nevertheless, many mutual fund houses allow NRIs based in the USA and Canada to invest in India in a hassle-free manner, but the options are limited. Let’s look at the mutual funds for NRIs from USA/Canada to invest in India.
Also Read: NRI Mutual Fund: The Basic 2021 Guide
Mutual funds for NRIs from USA/Canada
Since the implementation of the Foreign Account Tax Compliance Act (FACTA), many AMCs (Asset Management Companies) have stopped accepting funds from NRIs residing in the USA and Canada because of lots of paperwork and compliances on the part of mutual fund houses. Under the FACTA, financial players like AMCs, insurance companies and banks are required to furnish their client information to the Government of India that will further be shared with the US/Canadian Government. However, there are mutual funds for NRIs from USA/Canada to invest in India. Here are some of the mutual fund investment options for NRIs based in the USA and Canada:
- Sundaram Mutual Funds
- DHFL Pramerica Mutual Fund
- Reliance Mutual Fund
- L&T Mutual Fund
- BNP Paribas Mutual Fund
- UTI Mutual Fund
Each of these AMCs sets different NRI mutual fund investment conditions to accept investment from NRIs in Canada and the USA. While some of the mutual fund houses accept investment only in paper application forms, a few of them accept online applications through NSE NMFII or BSE STARMF platforms.
Best performing mutual funds for NRIs from USA/Canada
The following table shows the best performing mutual funds for US/Canada NRIs, based on past 3-year returns:
|Funds||3 Mo||6 Mo||1 Yr||3 Yr||5 Yr||2020|
|UTI Healthcare Fund||12.1||23||59.6||24.1||12.4||67.4|
|UTI Equity Fund||-1.3||21.4||72.2||15.7||16.2||31.5|
|BNP Paribas Substantial Equity Hybrid Fund||0.3||17.4||42.6||13.8||–||14.9|
|BNP Paribas Mid Cap Fund||7.7||34.9||76.3||12.2||13.9||23.1|
|UTI Value Opportunities Fund||-0.4||21.5||65.6||11.9||13.5||19|
|UTI Nifty Index Fund||-2.9||16||61||11.8||14.2||15.5|
|BNP Paribas Large Cap Fund||-3.8||13.7||48||11.7||12.2||16.8|
|UTI Dividend Yield Fund||8||26.1||62.8||11.5||14.1||18.9|
|UTI Long Term Equity Fund||-0.4||20.4||63.9||11||13.4||20.2|
|Sundaram Global Advantage Fund||7.3||14.7||37.3||10.8||13.1||21.4|
Note: Returns up to 1 year are on an absolute basis & more than 1 year are on CAGR basis as on 12 May 2021.
Rules for NRI mutual fund investment
There are a variety of investment options for NRIs in India, such as mutual funds, exchange-traded funds (ETFs), stocks etc. When investing in these financial instruments, they need to adhere to rules set by the Foreign Exchange Management Act 1999 (FEMA). As per the provisions in FEMA, investments into the capital market in India are allowed only with the compliance of conditions like opening of rupee-denominated NRI accounts (NRE/NRO), submitting KYC documents, etc.
KYC procedure for NRIs to invest in mutual funds
- KYC form: NRIs need to submit the KYC form with all the necessary details along with the investment application form to the concerned authorities.
- Documents: The following documents need to be submitted:
- Overseas address proof
- Indian address proof
- A copy of passport
- A recent photograph
NRIs in the Merchant Navy must submit a mariner’s declaration or certified copy of Continuous Discharge Certificate.
- Attestation: NRIs can get these documents attested by any of the following- the authorized officials of overseas branches of scheduled commercial banks registered in India, court magistrate/judge, public notary, or the Indian Embassy/Consulate General in the country of their residence.
- In-Person Verification (IPV): For investment in mutual funds for NRIs, IPV is mandatory and can be done through video conferencing with the official representatives of the mutual fund house where you intend to invest.
Mutual funds for NRIs: Investment procedure
- Direct/self-investment: NRIs can invest in mutual funds in India directly through their NRE/NRO account. They can get copies of the mutual fund KYC forms available on the websites of mutual fund houses. Or they can visit the Indian Embassy in the country of their residence to complete in-person verification.
- Power of Attorney (POA): NRIs can also appoint a Power of Attorney on their behalf to invest in mutual funds in India. Make sure that the assigned POA is KYC compliant. Both your signatures should be on the KYC documents that you submit to the respective mutual fund company.
Mutual Funds for NRIs from USA/Canada: FATCA guidelines
NRIs in Canada and USA are faced with a couple of compliance considerations to invest in mutual funds in India. The FATCA or the Foreign Account Tax Compliance Act requires all financial institutions to mandatorily share details of all transactions involving US citizens or NRIs with the US government. It is to ensure that there is no deliberate tax evasion on the income earned by US citizens overseas. The Government of India has also signed an Inter-Government Agreement (IGA) with the USA to improve International Tax Compliance and implement FATCA. Hence, mutual fund houses must meet all compliance requirements.
Before investing in Indian market, NRIs must consult market experts to make informed decisions. 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.
The common doubt in the minds of NRIs is whether they can invest in mutual funds in India? The answer is yes, NRIs are allowed to invest in mutual funds in India. They need to meet certain requirements as per the guidelines of FEMA for being an NRI for investing in NRI mutual funds.
Here is the checklist of mutual fund houses that accept investments made by NRIs:
– Birla Sun Life Mutual Fund
– DHFL Pramerica Mutual Fund
– HDFC Mutual Fund
– ICICI Prudential Mutual Fund
– L&T Mutual Fund
– PPFAS Mutual Fund (Parag Parikh Financial Advisory Services)
– SBI Mutual Fund
– Sundaram Mutual Fund
– UTI Mutual Fund
You can hold the mutual funds even after your residential status changes. NRIs need to write a letter to their mutual fund houses along with proof of NRI bank account, KYC documents, passport and overseas address proof.