Which mutual funds can NRI invest in? What is the process to invest in mutual funds?
AskedAs of this date (22nd May 2018) the mutual fund companies that allow US/Canada NRIs to invest in Indian mutual funds are as follows:
There were more mutual fund companies that allowed US/Canada NRIs to invest. However, now, the above 3 are the only mutual fund companies allowing US/Canada NRIs investment.
Indian mutual funds market looks like a good option to invest in due to several reasons. These include:
- Low effort and time required
- Indian growth
- Easy and convenient
- Diversification
- Double taxation avoidance agreement
There are 3 types of accounts that NRIs can use to invest in mutual funds in India:
1) NRE: Non-Resident External Rupee (NRE) account allows for complete repatriability and is tax free in India as well.
2) NRO: Non-Resident Ordinary Rupee (NRO) account allows for the balance in such an account to be repatriable up to a limit of USD 10 million. The interest earned is taxable at 30%, deducted at source.
3) FCNR: Foreign Currency Non-Resident (FCNR) account allows for free repatriability of the principal and interest. The interest earned is tax free in this case.
However, there are a limited number of Indian fund houses that NRIs from US can invest in. These are:
- Birla Sun Life Mutual Fund
- SBI Mutual Fund
- UTI Mutual Fund
- ICICI Prudential Mutual Fund
- DHFL Pramerica Mutual Fund
- L&T Mutual Fund
- PPFAS Mutual Fund
- Sundaram Mutual Fund
An NRI does not require any special permits, but just the regular documents including a picture, pan card, passport, PIO/OCI card, proof of residence and bank statement.
Non-Resident Individuals looking to invest in mutual funds in India have to follow a lot of compliance. The investments by the NRIs have to be made in local currency because the AMCs are not allowed to accept foreign currency.
An NRI needs to open one of the three bank accounts
· Non-resident external rupee (NRE) account with an Indian Bank. This is a rupee account. Money can be sent back to the residence country.
· Non-resident ordinary rupee (NRO) account with an Indian Bank. This is a non-repatriable account.
· Foreign currency non-resident account (FCNR) with an Indian Bank. The funds are held in foreign exchange. Money can be sent back to residence country just like NRE account.
The investor should attach with the application form a foreign inward remittance certificate (FIRC) or a letter issued by the bank confirming the source of funds. Moreover as per FATCA, the financial institutions also have to share the details of transactions involving US citizens.
NRIs are allowed to invest in mutual funds in India on a repatriable or non-repatriable basis, subject to regulations prescribed under the Foreign Exchange Management Act (FEMA).
The process of investing is very simple for general NRIs. Previously only few fund houses used to accept investments from NRIs, but the number is gradually increasing. Updating of the necessary documents needs to be done for a citizen who moves out of India.