Mutual Fund Investment: Nris Need Not Apply

Non-Resident Indians (NRIs) can invest in mutual funds in India, but they must comply with the Foreign Exchange Management Act (FEMA) regulations. As per FEMA, an NRI is a person with Indian citizenship who lives outside India. NRIs can invest in mutual funds in India via Non-Resident External (NRE) and Non-Resident Ordinary (NRO) accounts. They can invest directly using these accounts or by granting power of attorney to a trustworthy person who can invest on their behalf.

NRIs must update their residential status and bank account details. They need to submit a form to change their Know Your Customer (KYC) status, along with copies of their PAN card, passport, and proof of local and foreign addresses. They must also open an NRE or NRO account, as regular accounts are not permitted under FEMA guidelines. NRE accounts are suitable for NRIs who want to transfer their overseas earnings to India, while NRO accounts are for depositing Indian earnings such as pensions, dividends, and rental income.

There are additional compliance requirements for NRIs based in the US and Canada under the Foreign Account Tax Compliance Act (FATCA) guidelines. Only a few fund houses, such as Nippon India Mutual Funds and UTI Mutual Fund, accept mutual fund investments from NRIs based in these countries. NRIs based in the US and Canada need to submit an additional FATCA declaration form to the mutual fund house.

NRIs can benefit from mutual fund investment plans in India through hassle-free management and portfolio diversification. They can invest, withdraw, and manage their MF investments from anywhere in the world.

NRIs can invest in mutual funds in India as long as they adhere to the Foreign Exchange Management Act (FEMA)

NRIs (Non-Resident Indians) can invest in mutual funds in India, but they must adhere to the Foreign Exchange Management Act (FEMA) regulations. According to FEMA guidelines, NRIs cannot maintain a regular Indian bank account and must open an NRE (Non-Resident External) or NRO (Non-Resident Ordinary) account. NRE accounts are suitable for those looking to transfer their overseas earnings to India, while NRO accounts are meant for managing Indian earnings, such as pension, dividends, and rental income.

To invest in mutual funds, NRIs must also complete the Know Your Customer (KYC) process, which includes submitting documents like a passport copy, recent photographs, PAN card, bank statement, and proof of address. Some fund houses may also require an additional FATCA (Foreign Account Tax Compliance Act) declaration for NRIs based in the US and Canada due to more stringent compliance requirements in these countries.

NRIs can choose to invest directly in mutual funds using their NRE/NRO accounts or by granting a Power of Attorney (PoA) to a trusted individual in India, who can then make investment decisions on their behalf.

It is important to note that NRIs must update their residential status from 'resident' to 'NRI' in their KYC records and with the mutual fund house where their investment is held. This is because there are different taxation rules for NRIs and resident Indians, and failure to update this information could result in violations of the FEMA Act.

Overall, while there are some additional requirements and considerations for NRIs looking to invest in mutual funds in India, it is a viable option for those looking to secure financial stability for themselves and their families.

NRIs must open an NRO or NRE account to invest in mutual funds

NRIs can invest in mutual funds in India, but they must comply with the FEMA (Foreign Exchange Management Act) regulations. As per the FEMA guidelines, NRIs cannot continue with their regular bank account after their residential status changes. Additionally, asset management companies (AMCs) in India do not accept investments in foreign currencies. Therefore, NRIs must open an NRE or NRO account to invest in mutual funds.

An NRE (Non-Resident External) account allows NRIs to deposit their foreign earnings in an RBI-registered bank in India. On the other hand, an NRO (Non-Resident Ordinary) account is used to manage the Indian earnings of NRIs, such as pension, dividends, rental income, etc.

Once an NRE or NRO account is opened, NRIs can invest in mutual funds directly through regular banking channels or by granting power of attorney to a trustworthy person who can invest on their behalf.

To invest directly, NRIs will need to submit KYC documents, including recent photographs, self-attested copies of Adhaar, PAN, passport, bank statements, and foreign residence proof. The bank may also require in-person verification, which can be done by visiting the Indian Embassy in the NRI's country of residence.

For NRIs based in the US or Canada, there are additional compliance requirements under the FATCA (Foreign Account Tax Compliance Act) guidelines. Only a few fund houses, including Nippon India Mutual Funds, UTI Mutual Fund, Navi Mutual Fund, PPFAS Mutual Fund, and Axis Mutual Fund, accept mutual fund investments from NRIs based in these countries. NRIs in the US or Canada need to submit an additional FATCA declaration form to the mutual fund house.

NRIs can invest in mutual funds directly or through a Power of Attorney (PoA)

NRIs can invest in mutual funds in India in two ways: directly or through a Power of Attorney (PoA).

Direct Investment

NRIs can invest directly in mutual fund schemes via regular banking channels using their NRE/NRO account. They will need to submit the KYC documents, including recent photographs, self-attested copies of their Adhaar, PAN, Passport, bank statements, and foreign residence proof. Their bank may also require an in-person verification, which can be managed by visiting the Indian Embassy in their country.

Investment through Power of Attorney (PoA)

NRIs can also invest in mutual funds in India through a PoA. The PoA is a legal document that authorises a designated person to operate a mutual fund folio or account on their behalf. The PoA holder can make transactions on a folio as per the powers vested in them by the PoA document. The PoA document must be notarised and signed by all holders of the folio. It should then be submitted to the mutual fund company, along with the KYC documents, which must be signed by both the NRI and the PoA holder. The PoA holder cannot modify or change nominees in a mutual fund scheme. NRIs can add or remove a PoA at any time by writing to the AMC.

NRIs need to complete the Know Your Customer (KYC) verification process

NRIs (Non-Resident Indians) are required to complete the Know Your Customer (KYC) verification process when investing in mutual funds. This process is mandatory for all investors, including NRIs, and helps to verify their identity, assess potential risks, prevent fraud, and ensure compliance with legal and regulatory requirements. Here are the steps that NRIs need to follow to complete the KYC process:

Submit the required documents:

• Hand signature photo (ensure it matches your PAN and passport)
• Passport (including the front and back page)
• Overseas Citizen of India (OCI) Card (if applicable)
• Current address proof (driver's license, ID card, or utility bill dated within 3 months)
• Bank statement (dated within 3 months)
• Indian address proof (if applicable)
• Foreign Country Tax File Number
• Certified translation of any documents in a foreign language

Complete the KYC form:

• Provide personal details, including your current residential address
• Attach the required documents

Submit the KYC form and documents:

Submit the completed form and documents to a KYC Registration Agency (KRA) or a SEBI-registered intermediary

In-Person Verification (IPV):

Some institutions may require IPV, which can be done through a video call or by visiting the Indian Embassy in your country

Wait for approval:

The verification process may take around 7 to 8 business days

Onboarding:

After KYC approval, provide additional details such as city and country of birth, and NRO/NRE bank account statement or canceled cheque for the latest 3 months

It is important to note that NRIs must adhere to the Foreign Exchange Management Act (FEMA) rules when investing in mutual funds in India. They also need to update their KYC status promptly after becoming an NRI to ensure compliance with regulations.

NRIs can redeem their mutual fund investments by following the redemption procedure mentioned by the fund houses

NRIs can invest in mutual funds in India, but they must follow certain rules and tax regulations. To redeem their mutual fund investments, NRIs must follow the redemption procedure outlined by their specific fund house. Different fund houses in India have different procedures for redemption by NRIs.

When NRIs redeem their mutual fund investments, the corpus (investment + gains) is credited to their NRE or NRO account after deducting applicable taxes. Some fund houses may instead issue a cheque for the redemption amount. The redemption amount can also be transferred to the respective NRE or NRO bank account of the investor.

NRIs must adhere to the Foreign Exchange Management Act (FEMA) regulations when investing in Indian mutual funds. They must also be aware of the different definitions of an NRI in FEMA and the Income Tax Act, as this will determine where they can invest and how their gains will be taxed.

NRIs cannot invest in Indian mutual funds using foreign currency, so they must open specific Indian bank accounts. The two main options are:

• NRE (Non-Resident External) Account: Ideal for sending overseas income to India, offering easy repatriation of both principal and interest.
• NRO (Non-Resident Ordinary) Account: Used to manage income generated within India, though repatriation is more limited.

Once an NRE or NRO account is opened, NRIs can invest in mutual funds either through self or direct investments, or via a Power of Attorney (PoA). For direct investments, NRIs can invest via Indian banking channels, specifying whether the investment is repatriable or non-repatriable. For PoA, NRIs can assign someone in India to manage investments on their behalf.

NRIs must complete the Know Your Customer (KYC) process before investing. This includes submitting a copy of their passport, date of birth, photograph, address proof, and residential proof. Due to the Foreign Account Tax Compliance Act (FATCA), some Indian Mutual Fund Houses restrict investments from NRIs residing in the USA and Canada. However, many funds allow these investments with additional documentation.

Frequently asked questions