Unlike other investments, NRIs can invest in mutual funds without the approval from regulatory bodies such as the Reserve Bank of India (RBI). Furthermore, NRIs can opt for either repatriable or non-repatriable mutual fund investments. In this blog, we will explore the concept of NRI Repatriable Mutual Fund, their benefits and how NRIs can invest in them.
Can NRI Invest in Mutual Funds in India?
Yes, Non-Resident Indians (NRIs), Persons of Indian Origin (PIOs), and Overseas Citizens of India (OCIs) can invest in mutual funds in India, provided they comply with the regulations outlined in the Foreign Exchange Management Act (FEMA). They can invest in mutual funds in India using their NRI bank accounts that are NRE/NRO/FCNR accounts and after completing their KYC as an NRI.
How can NRIs Invest in Mutual Funds?
NRIs can invest in Mutual Funds in India through repatriable as well as non-repatriable basis. To invest in mutual funds with a repatriation basis, NRIs must have either of the following NRI bank accounts– an NRE (Non-Resident External) account or an FCNR (Foreign Currency Non-Resident) account. Both these accounts are Repatriable accounts that are exclusively designated for investments on a repatriation basis. Conversely, if an NRI wishes to invest on a non-repatriation basis, they can use the NRO (Non-Resident Ordinary) account, which is a rupee-denominated account suitable for making payments in Indian rupees (INR).
NRI Repatriable Mutual Fund: NRI Repatriable Meaning
- An NRI repatriable investment refers to an investment in mutual funds made by debiting the Non-Resident External (NRE) or Foreign Currency Non-Resident (FCNR) account of an NRI.
- An NRE account enables NRIs to hold their overseas earnings in India, denominated in Indian rupees (INR). It also allows NRIs to repatriate the funds from this account at any time, including returns, without incurring any tax liabilities.
- On the other hand, an FCNR account is a term deposit account that an NRI can maintain in a foreign currency. Balances in an FCNR account are also freely repatriable.
- When NRIs intend to invest in mutual funds in India, they must determine whether they want to repatriate their earnings from such investments. If yes, then these mutual fund investments should only be made through an NRE or FCNR account.
- Since balances in these accounts can be freely repatriated, the funds can be remitted according to the investor’s preference.
NRI Non- Repatriable Meaning
- When an NRI opts to invest in mutual funds using a Non-Resident Ordinary (NRO) account, the earnings from such investments cannot be repatriated.
- This account is partially repatriable up to USD 1 million annually, subject to payment of applicable taxes.
- Upon redemption, the proceeds are disbursed either through an INR cheque payable to the NRE account of the NRI or a USD draft drawn based on prevailing rates and RBI regulations.
- It is also possible to make these investments through a Systematic Investment Plan (SIP).
Redemption of Mutual Funds
- NRIs have the option to redeem mutual funds either directly or through a Power of Attorney (POA).
- When redeeming the funds, the capital gains rules will be applicable in the same manner as for resident Indians.
- The redemption credit for NRIs will depend on whether the investment was made on a repatriable or non-repatriable basis.
- For instance, if the investment was made from an NRO account, the redemption amount will only be credited to that specific NRO account.
- If the investment was made through debiting your FCNR or NRE account, the redemption proceeds will also be credited to the same account.
- However, in the case of NRI/FCNR investments, there is the option to choose redemption into your NRO account as well.
Method to Invest in Mutual Funds
Once an NRI has opened an NRE, NRO or FCNR account, NRIs can invest in mutual funds in India by any of the methods given below:
- NRIs should ensure that they provide the necessary Know Your Customer (KYC) information and documents when submitting their mutual fund application. Additionally, the fund house may require a physical verification process, which can be completed by visiting the Indian Embassy in the applicant’s country of residence.
- NRIs also have the option to invest in mutual funds in India through a Power of Attorney (PoA) holder. The PoA holder is authorized to make investment decisions on behalf of NRIs and can invest in mutual funds. However, it is important to ensure that the KYC documents include the signatures of both the NRI investor and the PoA holder when investing in mutual funds.
- Furthermore, NRIs can invest in Mutual Funds in India through SBNRI app that caters the needs of NRIs.
Top Mutual Funds for NRIs
Listed below are some of the top performing mutual funds for NRI investment in 2023:
| Name of the Mutual Fund | Assets Under Management (AUM) | Returns in 1 Yr | Returns in 3 Yr | Returns in 5 Yr |
|---|---|---|---|---|
| SBI Contra Fund | 10,564 crore | 34.52% | 43.54% | 18.17% |
| SBI Large and Midcap Fund | 11,430 crore | 31.42% | 32.02% | 15.78% |
| Nippon India Small Cap Fund | 28,778 crore | 42.89% | 49.75% | 20.90% |
| UTI Flexi Cap Fund | 25,318 crore | 19.44% | 24.08% | 12.85% |
| Quant Active Fund | 4,336 crore | 27.03% | 40.12% | 22.38% |
Benefits of Mutual Fund Investment for NRIs
Here are some of the advantages of investing in Mutual Funds for NRIs:
- Diversification
By investing in Mutual Funds, NRIs can benefit from diversifying their investment portfolio across various securities like stocks, bonds, and commodities. This strategy helps reduce the risk of potential losses.
- Professional Management
Mutual Funds are managed by experienced fund managers who possess extensive knowledge and expertise in investment management. These professionals conduct thorough market research and invest in securities expected to generate higher returns.
- Convenient Accessibility
NRIs have easy access to Mutual Funds. They can invest in these funds through their NRE/NRO accounts or by utilizing a power of attorney. Furthermore, NRIs can conveniently invest in Mutual Funds online through different platforms.
- Low Investment Requirement
Mutual Funds have a low minimum investment amount, which makes them accessible to NRIs with limited funds. NRIs can begin investing in Mutual Funds with as little as Rs. 500 through a Systematic Investment Plan (SIP).
- Liquidity
NRIs can easily buy or sell their Mutual Fund units at any time. This provides flexibility and convenience, particularly for NRIs who may require quick liquidation of their investments.
Contact SBNRI
Can NRI invest in mutual funds is one of the commonly asked questions by NRIs. 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 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.
FAQs
Yes, taxes are applicable to mutual fund investments in India for NRI investors. The tax implications for NRIs investing in mutual funds in India are as follows:
1. Short-term capital gains tax: Equity-oriented mutual funds are subject to a tax rate of 15% whereas tax on debt-oriented mutual funds are applicable as per the tax slab.
2. Long-term capital gains tax: Long-term capital gains on equity-oriented mutual funds is 10% without indexation benefits whereas long-term capital gains on debt-oriented mutual funds are taxed at a rate of 20% after accounting for indexation benefits.
Yes, just like resident Indians, NRIs can invest in Systematic Investment Plan (SIP). they can do so through their NRE or NRO accounts.
Given below is the list of documents that need to be submitted if NRIs want to invest in Mutual Funds in India-
a. Overseas address proof
b. Indian/ domestic address proof
c. A copy of your passport
d. Recent photographs
e. Copy of PAN card
f. Bank statement
g. PIO card (for PIOs)
