Tips for NRIs to Invest in Indian Mutual Funds

Indians migrate to other countries in search of better paying job opportunities. However, most Indians want to return to India one day as no place in the world can replace the joy of living in your own country. Be it the rich culture, food, or weather conditions, India is truly an incredible place to live. Most of the Indians that go abroad for work have dependents living in India. In such a case, making an investment in India becomes almost necessary for them. This article will give out tips for NRIs to invest in Indian mutual funds.

Can a NRI (Non-Resident Indian) invest in mutual funds in India?

Absolutely, NRIs can invest their money in mutual funds in India provided that they comply with the Foreign Exchange Management Act (FEMA). Through mutual funds, an NRI investor is able to create a diversified portfolio of a good mixture of equity and debt securities. Even if the NRI investor wants to play safe and requires regular income from the investment, then the Indian debt market has good potential to fulfil the desired requirements. The investment can be made with an appropriate mixture of equity, hybrid, and debt funds.

What are the benefits of mutual fund investments for NRIs

Today in the entire world, India has become one of the fastest growing economies and due to this, thousands of investors all around the world want to invest in India. The following are the benefits that NRIs can enjoy through mutual funds:

Manage fund online easily from anywhere

Thanks to technology and internet, it has become easier to manage and track mutual fund performance from anywhere in the world. Investors can control their investments online like switching and redeeming funds. There is no requirement to give physical bank DD/cheque or requirement of being in the same country.  In today’s day and age, most companies send the regular statement (CAS) through email. All the information related to the best mutual funds is updated online on a daily basis which can be accessed by the investor from anywhere, just by login to the mutual fund house website.

NRI investor can make more profit from currency exchange prices

If the value of the rupee has fallen as seen in recent times against the dollar, then as an NRI investor he/she can get more gains out of their investment. For example – If 1 dollar is equal to 74 rupees, then an NRI investor can get more units of a particular mutual fund. The dividend and returns due to increasing gap of the currency will help fetch higher returns and overall more profit for the NRI investor.

What is the Procedure for NRIs to invest in India

The mutual fund houses do not accept or foreign currency. The NRI investor will first need to open an NRE account, NRO account or FCNR (Foreign Currency Non –Resident) account with the bank in India. Following the opening of the above-mentioned account investment in the mutual funds can be done in the following ways-

  

a. Self

An NRI investor can carry out the transaction through normal banking platforms. The application along with KYC details need to be confirmed if the investment is on a repatriable or non-repatriable basis. For KYC, an investor will need to furnish passport copy, PAN card copy, residence proof outside India and a bank statement. The bank may ask for in-person verification which can be done by visiting the Indian embassy of the resident country.

b. Through Power of Attorney

The other method is to give the rights to someone else to do the investment on your behalf in India. Mutual fund house entertains Power of Attorney holders to make the investment and take crucial investment decisions on the NRI investor’s behalf. The signature of both the parties i.e. the NRI investor and the Power of Attorney holder need to present on the KYC document to make the investment.

Regulations set for NRI investors for mutual funds

KYC for NRIs

NRI investor needs to get the KYC done mandatorily for investment in mutual funds. They will need to submit proof of identity and residential proof.

FIRC (Remittance Certificate)

If the payment in the mutual fund investment is made through a draft or cheque, then the NRI investor need to attach FIRC (Foreign Inward Remittance Certificate) along with it. If that is not possible, then a letter confirmation from the bank will also do to confirm the funds have come through a legal channel.

 Redemption

The best performing mutual funds house will credit the investment (capital amount + gains) to the NRI investor account on redemption. If the investor has opted for non-repatriable investment, then the redemption proceeds can only be transferred to an NRO account.

What are the Tax implications for NRI Mutual Fund Investors?

Most of the time, NRI investors have the misconception that they will have to pay taxes in India and also in the resident country. This is not the case if India has signed a DTAA treaty (Double Taxation Avoidance Treaty) with the resident country. For example, if the taxes are also deducted in India on the investment, then the NRI investor will not have the liability of tax to be paid in his/her resident country.

Some of the reputed Mutual Fund Houses in India that accept NRI Investments

•    HDFC Mutual Fund

•    Sundaram Mutual Fund

•    DHFL Pramerica Mutual Fund

•    PPFAS Mutual Fund

•    SBI Mutual Fund

•    Birla Sun Life Mutual Fund

•    ICICI Prudential Mutual Fund

•    UTI Mutual Fund

•    L&T Mutual Fund

Some Important Points to remember when investing in India

•    Attachment of resident proof in the foreign country is mandatory along with the application

•    The right of repatriation of the amount is valid only until you have the NRI status

•    US and Canada have more stringent compliance of overseas investments for their residents

•    Check if your resident country comes in the countries that have signed the Common Reporting Standard.  CRS has been formed to report and eradicate tax evasion for the investment made in other foreign countries.

NRIs can certainly choose to invest in their home country. The process may look a bit complex initially but in the long run, the investments made in the home country are worth it. Presently there are eight mutual fund houses that are accepting investment in mutual funds from NRIs living in USA and Canada, where majority of Indian choose to travel for work. Hence, if you are a NRI then you should not miss the opportunity of investing in one of the fastest growing economies in the world.