India is a home for opportunities for investors whether they reside in India or are non-resident Indians (NRIs). One of the popular tools for investors is mutual funds since they offer promising returns, allow diversification, and are governed by laws and regulations for security and transparency.
The question is how can NRIs invest in mutual funds in India? Read this blog to know more.
Can NRIs Invest in Mutual Funds in India?
Yes, NRIs can invest in Indian mutual funds, provided that they comply with various regulatory requirements.
- Investment in INR: Asset Management Companies (AMCs) of mutual funds cannot accept foreign currency investments in India. NRIs must invest in Indian rupees.
- Indian Bank Accounts: NRIs must open a Non-resident External Account (NRE Account) or a Non-resident Ordinary Account (NRO Account) to invest in mutual funds in INR.
- Foreign Inward Remittance Certificate: NRIs must make payments for mutual fund investments via a cheque or a demand draft. They must also provide a Foreign Inward Remittance Certificate or FIRC.
- Compliance Declarations: NRIs must provide self-declarations that they have complied with the regulations of the Foreign Exchange Management Act (FEMA) and the Foreign Account Tax Compliance Act (FATCA).
- KYC Compliances: NRIs must provide documents like their passport, PAN, and address proof to complete the KYC requirements regarding mutual fund investments.
How Can NRIs Invest in Mutual Funds In India?
NRIs can invest in Indian mutual funds in India through the following ways.
- Direct Investment Through Your NRE or NRO Account
NRIs can invest in Indian mutual funds directly through their NRE or NRO accounts in India.
- NRIs who opt for this investment route can decide the amount and which mutual funds to invest in.
- NRIs need to visit the Indian embassy in their country of residence for an in-person verification. They must provide the required documents at the embassy.
- NRIs must open an NRO or an NRE bank account in India. An NRE account is useful for NRIs who want to transfer their overseas income to India for investment. An NRO account is suitable for Indians who wish to store and invest their income generated in India.
- Investment Through a Power of Attorney
Alternatively, NRIs can appoint someone in India to manage their investments in Indian mutual funds.
- NRIs can execute a legal document called a ‘power of attorney’ or PoA to authorize a person in India to conduct mutual fund transactions on their behalf.
- The authorized person would have the authority to make decisions regarding the Indian mutual funds of the NRI. For example, they can buy and redeem Indian mutual fund units on behalf of the NRI.
- This method is suitable for Indians who do not have the bandwidth to manage their Indian investment themselves.
Read: Can NRIs Invest in India via PMS?
How Can NRIs Invest in Indian Mutual Funds?
Here are simple steps to invest in mutual funds for NRIs in India.
Step 1: Checking the Residential Status
To invest in Indian mutual funds, the investor must be classified as a ‘non-resident’ as per the definition in the Foreign Exchange Management Act.
Step 2: Opening a Bank Account in India
NRIs cannot invest in Indian mutual funds through their foreign bank accounts. They must open a rupee-denominated bank account in India, which can be an NRE or NRO account.
Step 3: Choosing an Investment Method
There are two methods for investing in mutual funds for NRIs in India- direct investment and investment via a power of attorney. NRIs who wish to invest in mutual funds via an authorized person must draft a valid power of attorney in India to give authorisation.
Step 4: Completing the KYC Process
NRIs must complete the mandatory ‘Know Your Customer’ or ‘KYC’ procedure before investing in Indian mutual funds. The following documents are needed for KYC.
- A certified true copy of passport.
- A certified true copy of an overseas address proof.
- A true copy of the PIO Card (for Persons of Indian Origin).
- A certified true copy of the permanent address of the NRI.
- A proof of identity.
- If any of the documents is in a foreign language, an English translation should also be provided.
- The documents can be attested by either an Indian consulate or a foreign branch of an Indian-scheduled bank.
Conclusion
NRIs can invest in Indian mutual funds as per the Foreign Exchange Management Act. However, they will require NRE or NRO bank accounts. Alternatively, NRIs can appoint a person to invest in Indian mutual funds on their behalf through a power of attorney. However, the most important aspect of investing in mutual funds for NRIs is to have a long-term goal and be disciplined.
For NRI investment in India, get in touch with Moat Wealth.
