How Can NRIs Invest in Mutual Funds?

Step 1: Set Up an Account

Mutual fund Asset Management Companies in India cannot accept investments in foreign currency.

Indian laws, specifically the Foreign Exchange Management Act (Fema), do not allow you to park your money in a regular resident savings account in India once you have achieved the NRI status. This law makes it compulsory for an NRI to have the knowledge and know the NRE and NRO account differences and know which suits you more.

*  NRE: NRE account is well suited for those who want to send the money they have earned overseas to india.

*NRO: money kept in NRO accounts also has to be in Indian rupee and money cannot be repatriated to a foreign currency easily.

Once the account is activated, an NRI can invest by any of the below methods.

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A.    Self or Direct

*An NRI can carry out transactions, debiting or crediting through normal banking channels.

*Their application with the required KYC details must indicate that the investment is on a repatriable or non-repatriable basis.

* KYC documents consist of a recent photogragh, certified copies of PAN card , a passport copy, residence proof of outside india, and a bank statement . The bank may require an in-person verification which an NRI can comply with, by visiting the Indian embassy in their resident country.

B.Through the power of Attorney (POA)

Another common method is to have someone else invest on behalf of an NRI. In India, Mutual fund companies allow holders to invest on their behalf and take other decisions pertaining to their investments. However, the signatures of both the NRI investor and PoA should be present on the KYC documents to make such types of investment.

A.      

An NRI must complete the KYC process before starting investment in Indian mutual funds.

For that, they need to submit a copy of your passport (only relevant pages with name), date of birth, photo and address. The current residential proof, too, is a must, whether temporary or permanent resident in that country. Some fund houses may also insist on an in-person verification.

Many mutual fund houses in India don’t allow NRIs from the USA and Canada to invest in their schemes because of the cumbersome compliance requirements under the Foreign Account Tax Compliance Act (FATCA). On the other hand, there are some fund houses that have certain conditions on which they allow investors based in the USA and Canada to put money in their schemes.

So if you are an NRI from the USA or Canada, then look into the additional document requirement.

For Example, ICICI Prudential AMC, Birla Sun Life Mutual Fund and SBI Mutual Fund allow investments only through an offline transaction with an additional declaration signed by the client.

Step 3: How to Redeem?