NRI mutual funds in India - A complete guide.

 While Indians go abroad for better careers and financial opportunities, many of them dream of returning home someday. Many of these NRIs have families in India that they financially support. These NRIs are constantly looking for newer ways to invest their money in Indian markets in an attempt to help with some extra finances at home and also to save for their future when they return to India. There are many options like NRE Savings Accounts, NRE Fixed Deposits, FCNR Deposits, and more that NRIs can start to keep some funds saved for the future in India, but there are more options that may offer better returns in the long run, and mutual funds are one of them.

Much like resident Indians, NRIs are allowed to invest in mutual funds in India, however, they need to adhere to the Foreign Exchange Management Act (FEMA).

 

Here’s the procedure NRIs need to follow to invest in mutual funds in India:

 

Set up a bank account

Indian Mutual Fund Asset Management Companies do not allow NRIs to invest in foreign currency. According to Foreign Exchange Management Act (FEMA), NRIs cannot open regular savings accounts in India once they have become NRIs. However, they are still allowed to open NRE Savings Accounts or NRO Savings Accounts. These accounts help them save their money in INR in Indian accounts and also allows them to invest in mutual funds. SBM Bank India offers NRE and NRO Savings Accounts that not only offer lucrative returns and world-class privileges to its NRI customers but also allows them to invest in mutual funds in India.

 

NRIs who want to send money to India can open an NRE Savings Account. This account converts the money earned in the currency of residence to INR. Most NRIs use an NRE Savings Account to send money to their families in India, pay utility bills, or for investments. 

 

NRIs who want to save money earned from India in INR can open an NRO Savings Accounts. The currency in these accounts is deposited and retained in INR. NRIs who lease properties in India usually open an NRO Savings Account to save the rent money received.

 

Once an account is opened, an NRI can use the following methods to invest in mutual funds:

 

Self or Direct

An NRI can make transactions debiting/crediting via normal banking channels. The NRIs must complete their KYC process by submitting a photograph, certified copies of PAN card, passport copy, residence proof of outside India, and a bank statement. 

 

Through Power of Attorney (PoA)

Another way NRIs can invest in mutual funds is by getting someone else to invest on their behalf. Mutual fund companies in India allow such transactions as long as the signatures of both the NRI and the Power of Attorney are present on the KYC documents. 

 

Note: Many mutual fund houses in India do not allow NRIs from the USA and Canada to invest in their schemes due to various compliance procedures under the Foreign Account Tax Compliance Act (FATCA). However, there are a few fund houses that may allow NRIs from the USA and Canada to invest under certain conditions. It is recommended to look into additional document requirements in such cases.


Redemption

All mutual fund houses have different procedures for the redemption of funds. The corpus is usually credited to the NRIs’ NRE Savings Account or NRO Savings Account after-tax deduction.

 

Taxation for NRIs

NRIs sometimes hesitate to invest in India thinking that they might have to pay double tax on mutual fund schemes. However, if a Double Taxation Avoidance Treaty (DTAA) is signed between India and the NRIs’ country of origin, this can be avoided. 

 

Benefits of mutual funds investments for NRIs:

 

With the advent of mobile and internet banking, NRIs can manage their mutual funds in India from any part of the world. NRIs can buy, redeem, switch, withdraw and do a lot more online. No need to issue physical cheques, DDs, or handle cash. You don’t even have to be in the same country. It’s convenient and highly rewarding. 

 

Also, there are always chances of rupee appreciation. In case the rupee value surges against the NRI’s resident country’s currency, investors tend to make more profits. 

 

In conclusion, mutual funds are a great option for NRIs who are looking to invest in India. The initial process may seem a little complicated, but once the registration is done and things are on track, your investments can reap great returns. 

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