What an NRI needs to do to Invest in Indian Mutual Funds?

Last Updated on March 4, 2020

In the previous post we saw which bank accounts you need to open and why. Once you have done this you are all set to invest in mutual funds as an NRI.

In this article we take a brief look at investing in Indian Mutual Funds from the perspective of an NRI. This will guide you through the dos and don’ts of Mutual Fund investing, redemption procedures approvals etc.

1. Investing in Mutual Funds and Approvals :

The most common question is Can an NRI invest in Mutual Funds? The answer to this question is ‘YES’.  NRI can invest in Mutual Fund in Indian rupees via their NRE or NRO account.

There is no mandate by SEBI or RBI restricting NRIs from investing in Indian Mutual Funds. Hence, no approvals are needed for NRI to invest.

Most of the Mutual Funds have online platforms to buy/sell the units. NRI after complying with all the requirements should be able to buy the Mutual Funds online from any AMC. Except if you are a resident of US or Canada.

2. US/Canada NRI can invest only with a few AMCs:

Many AMCs do not allow investment in Indian mutual funds for NRIs based out of US/Canada. The reason is that mutual fund companies are subject to the regulatory constraints placed on them by the Securities and Exchange Commission (SEC) of the US, and are also bound by other stipulations, such as the Foreign Account Tax Compliance Act (FATCA) regulations. So only those AMCs who comply with these regulations can offer their funds to US/Canada NRIs. These currently are :

• Birla Sun Life Mutual Fund
• SBI Mutual Fund
• UTI Mutual Fund
• ICICI Prudential Mutual Fund
• PGIM India Mutual Fund
• L&T Mutual Fund
• PPFAS Mutual Fund
• Sundaram Mutual Fund

You may need to find out any extra requirement you need to fulfil to continue your investments.

3. Redemption of Mutual Funds units :

Redemption is similar to the normal redemption process applicable for resident Indians. Redemption proceeds would be paid to the investor either through cheques or credit directly to the investor’s NRE/NRO account from which the investment was made. This means that when you invest through your NRE account you will be able to repatriate the money in full after paying the tax on the dividends and/or capital gains that you have earned. If you made the investment from your NRO account, tax liability remains the same but repatriation is governed by NRO accounts rules.

Investors are advised to contact their banks/tax consultants if they desire remittance of the income distribution on units abroad.

4. Indexation Benefit :

An indexation benefit is available, if units are held for more than 12 months or the prescribed time for that particular asset.

5. Nomination Facility:

NRIs may make a nomination and also be nominees in folios of mutual funds.

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Related Articles:

• What an NRI needs to do to Invest in Indian Stocks?
• What Bank Accounts an NRI must have to Start Investing in India?
• I’m an NRI. How should I Invest in Indian Stocks?

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