A Guide To Investing In Indian Mutual Funds From Uae

Investing in Indian mutual funds from the UAE is a popular option for Non-Resident Indians (NRIs) looking to achieve their short and long-term financial goals. NRIs have hundreds of mutual fund schemes to choose from, and they can select schemes based on their risk profile and investment horizon. Mutual funds are also an excellent way for investors to diversify their portfolios and earn good returns on their investments.

To invest in Indian mutual funds, NRIs must follow the rules set out by the Foreign Exchange Management Act (FEMA) of 1999. This includes opening a rupee-denominated account and completing the Know Your Customer (KYC) documentation procedure. NRIs will need to submit a KYC form and various documents, including overseas address proof and Indian resident address proof, to a SEBI-registered intermediary. They will also need to get their documents attested by authorised officials and complete an in-person verification.

There are two main methods for NRIs to start investing in Indian mutual funds: direct/self-investment through an NRE or NRO account, or by appointing a Power of Attorney (POA) to act on their behalf. NRIs should be aware that their mutual fund investments are subject to taxation rules, and they may need to pay income tax on any gains.

Non-Resident Indians (NRIs) in the UAE can invest in mutual funds in India to achieve their short and long-term financial goals

Accounts and KYC Requirements:

To invest in mutual funds in India, NRIs must open either an NRE (Non-Resident External) account or an NRO (Non-Resident Ordinary) account with an Indian bank. NRE accounts can hold foreign currency and have no upper limit on transaction amounts, while NRO accounts are for managing income earned in India and involve converting foreign currency to Indian rupees.

Once the account is opened, NRIs must complete the Know Your Customer (KYC) process under the norms set by the Securities Exchange Board of India (SEBI). This includes submitting a KYC form and relevant documents, such as overseas address proof, recent photographs, Indian resident address proof, PAN copy, and passport copy, to a SEBI-registered intermediary. NRIs can send these documents by courier or post, and some intermediaries may also offer an online KYC option.

Taxation:

NRIs investing in mutual funds are subject to the same taxation rules as Indian residents. Capital gains tax applies to mutual fund investments, with different rates for equity and non-equity (debt) schemes. For equity mutual funds, short-term capital gains (held for up to one year) are taxed at 15%, while long-term capital gains (held for over a year) are taxed at 10%. For non-equity schemes, short-term capital gains are taxed at 30%, and long-term capital gains at 20% with indexation.

Mutual Fund Options:

There are several mutual fund houses that NRIs can consider, including ICICI Prudential Mutual Funds, DSP BlackRock Mutual Funds, Aditya Birla Sun Life Fund, Nippon Indian Mutual Funds, TATA Digital India Mutual Fund, SBI NRI Mutual Funds, and Kotak Mahindra Mutual Funds. These fund houses may have different modes of investment, with some accepting only paper application forms and others offering online investment applications through the NSE NMFII or BSE STARMF platforms.

NRIs can seek advice from financial advisors or wealth managers to evaluate their risk profile and select the most suitable mutual fund schemes to achieve their financial goals.

NRIs in the UAE have hundreds of mutual fund schemes to choose from

NRIs living in the UAE have hundreds of mutual fund schemes to choose from, and they can select mutual fund schemes based on their risk profile and investment horizon.

Some of the best mutual fund houses for NRIs living in the UAE include:

• ICICI Prudential Mutual Funds
• DSP BlackRock Mutual Funds
• Aditya Birla Sun Life Fund
• Nippon Indian Mutual Funds
• TATA Digital India Mutual Fund
• SBI NRI Mutual Funds
• Kotak Mahindra Mutual Funds

However, mutual fund houses set different rules to accept investments from NRIs living in the UAE. Some of them accept investment only through paper application forms, but others also accept online investment applications through NSE NMFII or BSE STARMF platforms.

• PGIM India Midcap Opportunities Fund
• Nippon India Small Cap Fund
• Kotak Small Cap Fund
• ICICI Prudential Technology Fund
• IDFC Sterling Value Fund
• ICICI Prudential Infrastructure Fund

NRIs can start investing in mutual funds by following any of the below-given methods:

• Direct/self-investment: Start mutual fund investment in India directly through your NRE or NRO account.
• Power of Attorney (POA): Indian mutual fund houses allow NRI investors to appoint a POA to act on their behalf.

NRIs need to pay income tax on the gains from mutual fund investment in the same manner as resident investors. Sale of equity mutual funds held for above 1 year is taxed at 10% without indexation benefits if the capital gain exceeds Rs. 1 lakh. On the other hand, short-term capital gains shall be taxable at 15% for redemption within 1 year.

NRIs need to open a Non-Resident External (NRE) account or a Non-Resident Ordinary (NRO) account with an Indian bank to invest in mutual funds in India

Non-Resident Indians (NRIs) living in the United Arab Emirates (UAE) can invest in mutual funds in India, and these funds are a good way to earn benefits and participate in the nation's growth. Mutual funds are also a great way to diversify investment portfolios and earn optimal returns.

To invest in mutual funds in India, NRIs in the UAE must first open either a Non-Resident External (NRE) account or a Non-Resident Ordinary (NRO) account with an Indian bank. These accounts are necessary to manage the income earned in India and to transfer foreign earnings to the country. Here is a breakdown of the two types of accounts:

Non-Resident External (NRE) Account:

• This is a banking facility for NRIs to deposit their foreign earnings into India.
• The account can be in the form of a savings, current, fixed, or recurring deposit.
• There is no upper limit on transaction amounts in an NRE account.
• Interest earned on this account is tax-free, and the entire amount (principal and interest) can be repatriated.
• An NRE account can be held jointly with another NRI.
• Income originating outside India can be deposited, and withdrawals can be made in Indian rupees (INR).

Non-Resident Ordinary (NRO) Account:

• This account is designed for NRIs to manage their income earned within India, such as rental income, dividends, pensions, interest, etc.
• The account can be opened as a savings or current account, or in the form of term deposits.
• The foreign currency deposited in this account is converted to INR.
• The NRO account can be held jointly with another NRI or a resident Indian.
• Interest earned on this account is taxable at 30% as per the Income Tax Act 1961.
• The interest amount can be repatriated, and the principal amount can be remitted up to USD 1 million per financial year.
• Income originating within India can be deposited, and withdrawals must be made in INR.

Once NRIs have opened one of these accounts, they must complete their Know Your Customer (KYC) process under the norms set by the Securities Exchange Board of India (SEBI). This includes submitting the necessary documents, such as overseas address proof and a passport copy, to a SEBI-registered intermediary.

NRIs must complete the Know Your Customer (KYC) procedure with a SEBI-registered intermediary to invest in Indian mutual funds

To invest in Indian mutual funds from the UAE, Non-Resident Indians (NRIs) must complete the Know Your Customer (KYC) procedure with a SEBI-registered intermediary. Here's a detailed guide on the KYC process for NRIs:

NRIs interested in investing in Indian mutual funds from the UAE must complete the Know Your Customer (KYC) procedure. This process helps to verify their identity and ensures compliance with regulatory requirements.

SEBI-Registered Intermediary

The first step is to identify and engage with a SEBI-registered intermediary. SEBI, the Securities and Exchange Board of India, is the regulatory body that oversees the Indian capital markets, including mutual funds. By using a SEBI-registered intermediary, NRIs can ensure they are dealing with authorized and compliant entities.

Submission of KYC Form and Documents

NRIs need to submit the KYC form, which can be obtained from the intermediary, and provide all the necessary details. Along with the form, certain documents must be submitted, including:

• Overseas address proof
• Indian resident address proof
• Recent photograph
• PAN (Permanent Account Number) copy
• Passport copy
• In the case of NRIs in the Merchant Navy, a mariner's declaration or certified copy of the Continuous Discharge Certificate

Attestation of Documents

The submitted documents must be attested by authorized officials. This can include officials from overseas branches of scheduled commercial banks registered in India, public notaries, court magistrates, judges, or the Indian embassy/consulate general in the country where the NRI is located.

Personal Verification (IPV)

As per SEBI rules, Personal Verification (IPV) is mandatory for the KYC process. The intermediary is responsible for conducting the IPV of NRIs to ensure the information provided is accurate and up-to-date.

Submission Process

Once the KYC form and documents are ready, NRIs can submit them to the intermediary. This can be done by courier or post, and some intermediaries may also offer an online KYC option.

Benefits of KYC Completion

By completing the KYC procedure, NRIs can access a wide range of mutual fund investment options in India. It is a one-time process, and once completed, investors do not need to repeat it when approaching another intermediary, making it more convenient for future investments.

In summary, NRIs planning to invest in Indian mutual funds from the UAE should carefully follow the KYC procedure with a SEBI-registered intermediary. This process ensures compliance with regulatory requirements and enables NRIs to access a diverse range of investment opportunities in India's growing economy.

NRIs can start investing in mutual funds in India by directly investing through their NRE or NRO account or by appointing a Power of Attorney (POA) to act on their behalf

NRIs (Non-Resident Indians) can invest in Indian mutual funds by opening an NRE (Non-Resident External) or NRO (Non-Resident Ordinary) account with an Indian bank. These accounts allow NRIs to deposit their foreign earnings and manage their Indian income, respectively. When opening an NRE account, you can deposit foreign currency, which will be converted to Indian rupees when deposited into an NRO account. There is no upper limit on transaction amounts in NRE accounts.

Once you have set up either of these accounts, you can start investing in Indian mutual funds by following these steps:

Direct Investment

You can invest directly in mutual fund schemes through regular banking channels using your NRE/NRO account. However, you will need to submit Know Your Customer (KYC) documents, including recent photographs, self-attested copies of your Aadhar, PAN, passport, bank statements, and foreign residence proof. Your bank may also require in-person verification, which can be done by visiting the Indian Embassy in your country.

Power of Attorney (PoA)

Another way for NRIs to invest in Indian mutual funds is by granting PoA to a trustworthy person who can invest on their behalf. Reputed Asset Management Companies (AMCs) allow PoA holders to make investment decisions and carry out transactions for the NRI. Both the NRI and the PoA holder must sign the KYC documents to be eligible to invest in mutual funds in India.

It is important to note that not all AMCs accept mutual fund applications from NRIs, especially those based in the US and Canada, due to additional compliance requirements under the Foreign Account Tax Compliance Act (FATCA). Therefore, it is advisable to check with your chosen AMC about their specific rules and requirements before submitting your application.

Additionally, before investing, NRIs should refer to the Scheme Information Document (SID) of the mutual fund scheme they are interested in to understand the specifics of their chosen investment option.

Frequently asked questions