Are you an NRI, wanting to invest in Indian mutual funds?

NRI or non-resident Indian is a citizen of India or a person of Indian origin who goes out from the country for some official purpose/employment, carrying on their own business or with the intention to stay outside the country for more than 182 days or more during a financial year and 365 days or more during the preceding four financial years. Even if you are an NRI, you can still make investments in India.

An NRI investor should be KYC compliant before making investments in mutual funds. As mutual fund houses are not allowed to accept investments in foreign currencies, they have to open an NRE/NRO account with a bank in India to route their investments. Investments routed through NRE account are freely repatriable whereas those routed through NRO are not. NRIs will have to submit copies of his passport and foreign address proof to the fund house as part of KYC documentation procedure. After submitting the above documents, if you are visiting India, you should get your in-person verification (IPV) done at the respective AMC, distribution house, CAMS or Karvy.

NRIs can open two types of rupee-denominated bank accounts in India – NRE (Non-Resident External) a/c and NRO (Non-Resident Ordinary) a/c. NRE a/c is an account to transfer foreign earnings to India. It has no limit on repatriation and the interest earned on NRE deposits is tax-free. NRO a/c is an account that manages NRI’s income earned in India. It has a set limit on repatriation and the interest earned is taxable. Both accounts can be used for making investments in India. Hence, based on the source of income earned and repatriation decision, NRI can decide which account to opt for.

NRI investors can also appoint a Power of Attorney (POA) holder to invest and redeem mutual funds on their behalf. While purchasing, the POA holder has to submit the original POA or duly notarised copy of it to the fund house. Once the POA is registered, the POA holder can purchase or redeem mutual fund units on the behalf of NRI.

NRIs residing in USA and Canada have additional compliance and regulatory restrictions. Due to this, they cannot invest in certain mutual funds in India. Therefore, you need to check with the fund houses (AMC) that accept investments from US/Canada based NRIs. Also, declarations need to be made by NRIs, before investing. At times, things may get complicated for US-based NRIs as many fund houses do not allow investments by US-based NRIs due to the cumbersome compliance requirements of Foreign Account Tax Compliance Act (FATCA).

Sabyasachi Paul has been associated with equity research and advisory on equity markets in India for over 9 years & currently heads the equity research desk of Eastern Financiers Ltd, Kolkata. He also manages a portfolio on the online platform Kristal. Find link to the strategy named ‘The Tortoise’

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