Yes, NRIs can invest in Mutual Funds (MFs) in India. Although, they must adhere to the regulations set out for them in the Foreign Exchange Management Act (FEMA). This Act specifies that an individual residing outside of India but is still a citizen of India is eligible for investing in MFs.
If you wish to read up more on the latest amendments in FEMA or figure out the exact definition of an NRI, click here https://rbi.org.in/Scripts/BS_FemaNotifications.aspx.
MF application procedure for NRIs
NRIs can apply for mutual funds in India directly or indirectly. The former requires them to set up an NRE, NRO or FCNR bank account with online transaction rights. The latter method involves hiring another institution or individual to invest in MFs on the NRI’s behalf. All you have to is transfer power of attorney to the entity applying for MFs.
To operate with any method, you first need to submit your KYC details to the bank or an Asset Management Company (AMC). These details include India-issued government documents such as,
- PAN Card (whether you pay tax here or not)
- International residence proof
- Recent bank statements
- And, latest photographs.
In case you choose to invest directly, your bank might request in-person verification. You can do that by visiting the Indian Embassy in whichever country you presently reside. If you’re applying for mutual funds online through an AMC, the firm, in addition to the KYC documents, will require signatures of both the Power of Attorney (PoA) holder and the primary applicant.
Things to consider when investing in MFs for NRIs
- If you’re an NRI worried about paying double taxes on MFs, fret not! The Indian Government has a Double Taxation Avoidance Treaty (DTAT) signed with several countries. For instance, India has signed DTAT with the USA, allowing NRIs to claim tax relief in the US after paying them on MFs in India.
- In case you want to redeem all your MFs in India, the tax on them will be deductible at the source. Also, you can repatriate the funds invested and earned in MFs to your chosen account till you remain an NRI.
- If you don’t wish to invest a lump sum in MFs, but still want a bite of the action, consider a Systematic Investment Plan (SIP). This financial instrument allows NRIs to invest into a mixed bag of MFs with even a small amount. With a Systematic Investment Plan, you can strategically build a substantial financial corpus over time.
The bottom line
The path to MF investment is not only open but also profitable for NRIs, especially with online apps available today. To explore all possible investment avenues or apply for a systematic investment plan online, download the apps like moneyfy app and understand its offerings.