Can NRIs invest in mutual funds in India online? Here’s a direct answer to the question on your mind: Yes, you can invest in mutual funds in India if you’re an NRI. Mutual funds for NRIs are almost as accessible as it is for resident Indians.*
All transactions between you and the mutual funds will be in Indian National Rupees (INR). You will have to pay the mutual funds in INR, and whatever return you get, they’ll pass on to you in INR as well.
Keep in mind, in the case of an NRO account, only the returns are repatriable. The principal amount is not.
If you are an NRI, you probably already have an NRE/NRO account. Great!
Also read, Difference between NRE and NRO Account
All of this is to make sure you are KYC-compliant. An in-person verification would also have to be carried out.
Income earned will be subject to the tax laws of India.
Equity Mutual Funds: You’ll have to pay 15% as tax if the investment is redeemed before one year.
Debt Mutual Funds: the rate of tax depends on your income tax slab if the investment is redeemed before three years.
Equity Mutual Funds: No tax needs to be paid if investments are redeemed after a year from the investment.
Debt Mutual Funds: If redeemed after three years from the date of investment, a tax rate of 20% is applicable on the gains with indexation benefit.
Taxes you’ll have to pay in the country you reside in will depend on the individual country's laws. India has Double Tax Avoidance Agreements with 88 countries (USA and Canada also a part of this) of the world. This agreement aims to reduce taxing the same income twice.
For example, if you (NRI) are based in the USA make short-term capital gains, you will have to pay 15% tax in India. The rate of tax for the same gains is 30% in the USA. However, you will have to pay only the difference in the tax rate in the USA. Thus, you are not taxed doubly.
IMF foresees India’s growth in the upcoming years. A report by the World Bank says something along similar lines. The Chinese official media indicated in an article that India could become the “factory of the world”.
India has attracted the highest FDI inflows since 2015, as opposed to its erstwhile rank of 15 just a few years back.
The world economy is not doing very well as a whole. The Indian economy in such cloudy times appears as a silver lining. Consistently rated as one of the world’s fastest-growing nations, India has attracted investments from all over the world. It is no surprise, then, that retail investors want a piece of the cake too.
In fact, you are probably reading this because an NRI friend of yours has shown interest or has already started investing in Indian mutual funds. No surprise, then, that more NRIs are investing in Indian mutual funds.
NRI from the USA and Canada cannot invest in all mutual funds. Certain mutual funds need investors to be physically in India while making investments. This means that they cannot do a SIP.
Mutual Fund Houses like Reliance let NRI from the US/Canada invest online also. Please, Whatsapp 9108800604 for more details.
Unlike resident investors, NRI stock market investors cannot invest in just about any sector that piques their interest and seems poised for an uptrend.
NRIs are barred from investing in specific sectors as per the RBI mandate. And heavy penalties are attached to attempts to invest in these sectors.
It’s not only shares of specific sectors that NRIs need to avoid. Some stock market instruments are also not open for external investment. For example, currency derivatives and commodities are off-limits for NRI stock market investors.
The kind of trading that involves buying shares and selling them on the same day is known as intraday trading or day trading.
As an NRI investor, this type of trading is off-limits. However, if you have a short investment horizon, you can still buy shares, wait for their delivery and sell them in the short term. Provided the pricing bodes well for your investment goals.
The dividend amount and interest you might earn on your stock market investments are repatriable. However, the principal investment (in this case, the value of the shares or the bond) is not repatriable.
But when you invest in an IPO, you can repatriate the entire amount. You need not use your PIS to buy IPO shares. Keep in mind that the issuer of the shares can decide whether or not to permit NRI investors. For example, the LIC IPO did not welcome NRI investors.
Investing in the Indian stock market or any other form of investment is not a more complex process for NRI investors than for resident investors. However, to ensure that you are not breaking any rules and to avoid the heavy penalties associated with breaking the rules, it might make sense for you to hire a financial advisor or consultant.
The only challenge that might exist for NRI investors is avoiding banned sectors and staying within the limits of NRI investors. Note that the stock market remains unpredictable. So do consider your risk appetite, investment horizon, goals and optimal entry and exit prices.
*Franklin Templeton Mutual Fund does not accept investments from NRIs and PIOs.
*The options for NRI from the US/Canada are fewer than Indian residents.