Here’s a Checklist for NRIs Planning to Invest in Mutual Funds in India

Over the years, mutual funds have gained immense popularity in India. However, that does not mean that you cannot invest in the funds if you are not a resident Indian. You might have the question in mind that can NRIs invest in Mutual Funds in India. India is a growing economy and the country attracts many investments from overseas investors. Hence, NRIs and Persons of Indian Origin (PIO) can invest in Indian markets. The NRIs have gone out of the country for greener pastures but many of the NRIs plan to come back to the home country, eventually. This is one of the most important reasons, as to why NRIs want to create assets in their home country, and mutual funds are the best way to do so.

NRIs can also invest in mutual funds on a repatriable or non-repatriable basis as per regulations recommended under the Foreign Exchange Management Act (FEMA). Investors from the USA and Canada are not allowed to invest in the Indian fund houses because of the stringent compliance requirements by the Foreign Account Tax Compliance Act (FATCA). However, some fund houses are now open to accepting investments from investors in the USA and Canada.

In addition, a few fund houses also have certain conditions for investors in the USA and Canada to invest in mutual funds for NRI. For example, the investments should only be through offline mode with an additional declaration signed by the client. Similarly, there are mutual fund companies, which do not allow USA and Canada investors to invest in close-ended funds.

For NRIs, who are not from USA and Canada, the process of investing is as simple as that for Indian investors. They only need to comply with the certain norms as per the country they are based in.

Steps for NRIs and PIOs to invest in mutual funds in India

  • NRIs need to open an NRE or NRO account. They can invest on a repatriable or non-repatriable basis.
  • They need to fill up a form and submit necessary proofs to complete the Know-Your-Customer (KYC) formalities. The proofs need to be attested by authorized authorities.
  • Application for mutual funds needs to be duly filled along with FATCA and Common Reporting Standard (CRS) declarations.
  • The NRIs can invest in the mutual funds independently or through the ‘Power of Attorney.’
  • The payment can be made through an NRE or NRO account. The NRIs also needs to submit a foreign inward remittance certificate.

Why NRIs should invest in India

The reasons why mutual funds investment in India for NRIs are beneficial:

  • Hassle-free management

It is very easy for NRIs to monitor their mutual fund through online portals. The NRI investors can buy, sell, switch, and redeem their units online. They can also opt for a Systematic Withdrawal Plan (SWP) through online mode. There is no need to make a payment through check, Demand Draft (DD) or fill up any form for doing any of these processes. Mutual fund companies also keep the investors posted through online account statements via email. Fund houses also inform investors on portfolio disclosures on a daily basis.

  • To benefit through rupee appreciation

If the INR appreciates against the domestic currency, the NRIs will profit from the investments. Even if the currency depreciates, there can be more returns from mutual funds if the investments are planned properly.

  • Fund management by expert professionals

When it comes to NRI investment in India, mutual funds do not require the expertise of stock picking from investors. An NRI who is away from the country may not be in a position to research and keep a tab on the happenings. For such investors, a mutual fund is an ideal route, as the entire responsibility of choosing the assets and steering the investments lies in the hands of the fund manager. They choose the best mutual funds in India for NRIs and ensure that each investor receives market-beating returns against their individual risk appetite.

  • Mutual funds are less risky

As compared to other investment avenues, mutual funds carry less risk. The funds are designed in a way that they are diversified and there is an equitable distribution of risk elements. They are built in a manner that there are stocks from varied sectors. Hence, if a particular sector does not perform well, there will be other categories, which will cover up the loss.

  • To ensure a strong financial security

If an NRI investor were planning to move anytime in India after working for an entire lifetime, he would like to ensure that his finances are strong. Mutual funds are the best way to ensure that the finances are channelized into a moderate-risk high-return avenue. If there is proper strategic planning in place, the investors can build their corpus through Systematic Investment Plans (SIPs) over the years, or invest a lump sum that they have accumulated after working for a considerable number of years.



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