Can NRI Invest in Mutual Funds?

Can NRI Invest in Mutual Funds?

Yes, an NRI can invest in mutual funds in India as long as the NRI adheres to the rules of the Foreign Exchange Management Act (FEMA). India is slowly and steadily unlocking its growth story and, in the process, creating a vast amount of wealth for all the investors investing in its growth story. India is one of the fastest-growing economies in the world. The Indian stock market is also one of the best-performing markets in the world.
India has been a constant recipient of massive FDI & FII inflows. A majority of these inflows get directly invested in Mutual Funds. Mutual Funds are one of India’s most sought out investment options for NRIs in India. Many NRIs invest in mutual funds due to their easy and simplified investment and redemption process.

How Can NRI Invest in Mutual Funds?

An NRI can invest in mutual funds. However, it is not as simple as it is for a resident Indian. There are only a few ways through which an NRI can invest in mutual funds. Below is the process of how an NRI can invest in mutual funds:

Step 1 - NRI Bank Accounts

An NRI needs to have an NRI bank account to invest in mutual funds in India. An NRI can open an NRE/NRO account with any Indian bank to do banking transactions in India. An NRE account is advisable for an NRI since it is convenient to transfer their foreign income back and forth from India. 

Step 2 - Get Your KYC Done

KYC stands for Know Your Consumer. The KYC is a form SEBI introduced for establishing customer identity, customer activities, and customer’s source of funds. SEBI purposefully designed the KYC standards to protect the financial institutions from fraud, corruption, and money laundering. 
An NRI can submit the following documents to complete their KYC process:
  1. Overseas Address Proof
  2. Indian Address Proof
  3. A Copy of The Passport
  4. Recent Photograph
  5. A Copy of The Pancard
  6. Bank Statement

Step 3 - Investment Procedure

An NRI can invest in mutual funds through a professional financial services company. An NRI can invest in mutual funds through offline and online channels. The offline method includes filling in forms and cheques, whereas the online method includes investing through net banking. 
An NRI can also invest in mutual funds by assigning a Power Of Attorney (POA) to another person. In cases where the NRI has issued a power of attorney (POA) to another individual, the said individual can invest in mutual funds on behalf of the NRI.

Why Should An NRI Invest In Mutual Funds?

Professionally Managed Funds: Mutual Funds are professionally managed, which frees the NRIs from the tedious task of stock research and analysis. Moreover, the transparency of a mutual fund scheme ensures that the NRI knows all about his investment. 

Multiple Schemes: There are various types of mutual funds – Equity, Debt, Hybrid, etc. Each type of mutual fund has its advantages and disadvantages. An NRI can choose the kind of mutual fund to invest in based on his objectives. 

Diversification Of Risk: Investing in mutual funds enables the NRIs to diversify the investment basket/portfolio. An NRI could have invested in various financial instruments in India and investing in mutual funds would diversify the NRIs overall investment portfolio.

Mutual Fund Taxation For NRIs:

As discussed earlier, NRIs can invest in mutual funds. Hence the NRIs also need to comply with the necessary taxation requirements. The NRI needs to be aware of two types of taxes – Short Term Capital Gain Tax (STCG) & Long Term Capital Gain Tax (LTCG). STCG is applicable when an NRI purchases and redeems mutual funds within one year. LTCG is applicable when an NRI redeems the mutual funds after the completion of 1 year of purchase. 
For Equity Oriented funds, the STCG tax rate is 15%, (holding period less than 1 year) whereas the LTCG tax rate is 10% without indexation benefits. For Debt Oriented funds (holding period less than 3 years), the STCG is as per the NRIs income tax slab, whereas the LTCG tax rate is 10% without indexation benefits. 
Moreover, India has entered into the DTAA (Double Tax Avoidance Agreement) with more than 90 Countries. DTAA agreement ensures that the same income cannot be taxed in 2 countries. As per this agreement, the NRI has to pay tax on the gains made on mutual funds in India only and not in the NRIs country of residence. Most NRIs can take benefit of India’s DTAA agreement with the country of their residence and invest freely in India.

How Can We Help You?

Ashutosh Financial Services Private Limited is a professional NRI services provider company. We have been assisting and serving the needs and requirements of the NRIs for over 20 years. We have happily served over 500+ NRIs with their various needs and requirements for investing in India over the last 20+ years.

NRI investments are a complicated matter as an NRI needs to adhere to various rules of the Foreign Exchange Management Act (FEMA), Income Tax, Reserve Bank Of India (RBI), etc. An NRI must comply with all the rules of various institutions to avoid unnecessary troubles.

Through our years of experience, we at Ashutosh Financial Services have created many custom processes. We have designed them specifically to simplify the entire process of NRI investments. At Ashutosh Financial Services, we have a team of experienced employees who are well-versed in an NRI investment’s intricacies.

At Ashutosh Financial Services, we follow a process-driven approach to cater to an NRI’s needs. The steps of the process are as under:
  • Preliminary Discussion: Thorough Discussion about the NRI’s objectives, needs, and requirements. We also discuss the taxation part of the investment.
  • Risk Profiling: Based on our preliminary discussion, we determine the maximum level of risk an NRI should take to attain his objectives & goals.
  • Research & Analysis: We do in-depth research and analysis of the schemes and plans where the investment needs to be made to attain the NRIs objectives. We boast of an in-house research & analysis department
  • Investment Process: After all the necessary analysis, we approach the NRI again with a detailed plan/outline of how the investment needs to be done and how the investment objectives will be attained.
  • Dedicated Relationship Manager: Every investor has a dedicated relationship manager at Ashutosh Financial Services. In the same way, an NRI investor would also have a dedicated relationship manager, who shall be the one-point contact for the NRIs future needs. The relationship manager will be available to assist the NRI with all their requirements.

Ashutosh Financial Services is a one-stop financial services provider. At Ashutosh Financial Services, we believe in providing quality and unbiased financial services to the NRIs.

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