Although NRIs can invest in mutual funds in India, AMCs in India don’t accept investments in any other currency except the INR. NRI investors need to open any of the 3 accounts – NRE, NRO and FCNR accounts – to make investment in mutual funds. NRIs and OCIs can invest in mutual funds in India on a repatriation and non-repatriation basis. Non-Resident Indians usually have both NRE and NRO bank accounts. However the question arises which one is the most suitable bank account i.e. NRE or NRO for mutual funds in India?
NRE or NRO for Mutual Funds?
NRIs can invest in mutual funds in India using an NRE as well as NRO account. They can choose between NRE and NRO accounts based on their investment goals and sources of investment amount. You have to decide whether you want the income generated from mutual funds to be sent to a bank account in the country of your residence or to an Indian bank account.
NRE Account for Mutual Fund Investments:
NRE account is a rupee account that NRIs can open to deposit their foreign earnings in India. NRIs can use an NRE account to invest in mutual funds on a full repatriable basis. This means the redemption proceeds can be repatriated to a bank account abroad. When the investment is made through funds in an NRE account, the proceeds can be transferred to both NRE and NRO accounts.
NRO Account for Mutual Fund Investments:
NRO account is a rupee account opened by NRIs for depositing their Indian or foreign currency earnings. NRIs can use funds from an NRO account to invest in Indian mutual funds on a non-repatriable basis. There are some restrictions on repatriation of funds to a foreign country in which an investor resides. Moreover, the redemption proceeds will be credited only in an NRO account.
FCNR account is like an NRE account except the fund is saved in any of the acceptable 6 foreign currencies.
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It is important to note that income from mutual funds is repatriable only if the investment is made via an NRE/ FCNR account of investors or by inward remittances from overseas through normal banking channels. TDS will be applicable when redemption is made to any of the accounts.
Restrictions on MF Applications from NRIs based in USA and Canada
NRIs living in the USA and Canada must remember that only a few Indian mutual fund houses accept applications from these countries because of Foreign Account Tax Compliance Act (FATCA). As per this act, AMCs handling more than 15 investors from the US must be registered in the US as well. Some of the mutual fund houses that receive mutual fund investment from NRIs in US/Canada are SBI, UTI, Birla Sunlife, L&T, BNP Paribas, etc.
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 in-depth 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.