Whenever I ask an NRI about their investments in India – most of them share a list of properties that they have purchased in the last few years. NRIs simply have to understand Real Estate is an asset class like any other – there are pros & cons. Let me stick with the Comprehensive Guide for How Can NRI invest in mutual in India.
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Can NRI Invest in Mutual Fund in India?
NRIs are allowed to invest in mutual fund schemes in India.
Availability of MF schemes for NRIs to invest
NRIs from all over the world can invest in most of the Mutual Fund Schemes in India except for some restrictions on NRIs based in the US and Canada.
There are restrictions due to compliance requirements.
They can invest only in the schemes of some of the fund houses such as Birla Sun Life, DHFL Pramerica MF, ICICI Prudential, L&T MF, PPFAS Mutual Fund, SBI, Sundaram, UTI Mutual Fund, TATA Mutual Fund, Reliance Mutual Fund, and Franklin Templeton Mutual Fund.
How to Invest in Mutual Funds for NRI in India
- Non-Resident Indians can invest through their Demat account linked to the NRE/NRO account.
- They can also open an account in an online platform such as MF Utility (MFU) and manage their investments.
- Non – Resident Indians can also buy and sell MF units directly from the fund house using their online services or paper-based application forms.
“NRI can also invest in Indian Mutual Funds by giving Power of Attorney (POA) to a family member in India.” wiseNRI
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Details on investment amount and repatriation
- Investments in mutual funds can be done in INR only. The amount has to be debited from the NRE or NRO account. Other remittances being used require a Foreign Inward Remittance Certificate.
- Redemption proceeds on the sale of MF shall be credited to the respective NRE/NRO bank account of the investor. The redemption will be done in INR only. Redemption proceeds of investments can be fully remitted back abroad on a repatriation basis assuming the investment was done as a Non-Resident Indian and from an NRE account. Redemption proceeds to an NRO account cannot be repatriated easily.
Requirements for an NRI Investment in Mutual Funds in India
KYC for NRIs
Non-Resident Indians have to be KYC compliant to invest in Mutual funds. They have to file in for a fresh KYC even if they were KYC compliant as resident Indians.
We have a detailed article on- How Can NRIs Do Mutual fund KYC
Non-Residents Indias need to have an NRO or NRE account for the transfer of funds to and from the MF for the investment. The bank account operational in a foreign country cannot be used for Mutual Fund investments in India.
Non-Resident Indians have to give the FACTA and CRS self-declarations too.
The form can be downloaded from AMFI, any MF, or KRA websites. The necessary documentation such as PAN, passport, and overseas residence proof should be submitted. An In-person verification can be done by the advisor or Indian embassy in the country of residence or in many cases online.
Advantage of Mutual Funds for NRI
MF schemes are apt investment vehicles for NRIs to invest in India. The main advantages of investing in Mutual fund schemes are –
- They offer a diversified portfolio which helps reduce risks and improve chances of better returns
- They are highly liquid. You can buy them and sell them at your convenience and as per your requirements in most cases.
- They are managed by professionals and so you get the benefit of expert investment decisions.
- You need not have a large sum to invest in Mutual Funds.
- Some MF offers tax savings.
- Easy to manage as NRIs can invest in Mutual Funds online.
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Mutual Fund taxation for NRI
Equity Mutual Funds for NRI in India
– Short-Term Gains – 15% of the gains is payable as tax
– Long Term Gains – Gains up to Rs. 1,00,000 per year are exempt from tax. 10% tax is payable on gains over and above that amount.
– Short-Term Gains – 30% of the gains is payable as tax
– Long Term Gains -If it is a listed MF, 20% of the gains is payable as tax (with indexation). In the case of unlisted MF, 10% of gains are applicable (without indexation)
Fixed Maturity Plans
– Tax on Short Term Gains
– If the FMP matures in less than 3 years, tax is applicable as per the income tax slab of the individual.
– In the case of long term gains, 10% tax, without indexation is applicable and 20% with indexation
You can read our detailed post on Taxation of MF for NRI
Nominees and joint ownership
- NRIs can make joint investments in mutual funds in India with another NRI who is KYC compliant. (his/her bank details are not required)
- A Non-resident Indian can appoint an NRI or a resident Indian as a nominee for his investments in mutual funds.
There are many MF houses that offer numerous schemes. As an NRI, you should pick up the right funds to invest in. The choice depends on factors such as the performance of the fund, your financial status, financial needs, cost of investment, and market conditions.
If you are unsure on how to pick up the right investment, consult a professional financial adviser.
Hope this post gives you an idea about can NRI invest in mutual fund in India. if you have any questions feel free to add them in the comment section. If you think I have missed any major point in this post – just let me know & I will revise.