A Comprehensive Guide to NRI Investments: Mutual Funds in India Explained

Can NRIs Invest in Mutual Fund in India?

NRIs are permitted to invest in India’s mutual fund schemes. There are mutual fund schemes available for NRI investments NRIs from all over the world can invest in the majority of Mutual Fund Schemes in India, excluding those from the United States and Canada. There are restrictions due to compliance requirements.

How to Invest in Mutual Funds for NRI in India?

1. Through their Demat account connected to their NRE/NRO account, Non-resident Indians can invest.

2. They may also create an account and manage their assets on an online platform like MF Utility (MFU).

3. Using the fund house’s internet services or paper-based application forms, Nonresident Indians can also purchase and sell MF units directly from the fund house.

Information on the Investment amount and Repatriation

Mutual fund investments can only be made in INR. The NRE or NRO account must be debited of the required amount. A Foreign Inward Remittance Certificate is necessary for any other remittances.

The investor’s corresponding NRE or NRO bank account will be credited with the redemption profits from the sale of the mutual fund. Only Indian rupees will be used for redemption. If the investment was made as a Non-resident Indian and from an NRE account, the redemption profits can be entirely sent back abroad on a repatriation basis. An NRO account redemption funds cannot be readily repatriated.

Requirements for NRI Investment in Indian Mutual Funds

1) KYC for NRIs

To invest in mutual funds, Non-resident Indians must comply with KYC requirements. Even if they were KYC compliant as resident Indians, they must submit an application for a new KYC.

2) Redemption

For the transfer of money to and from the MF for the investment, Non-resident Indians must have an NRO or NRE account. It is not possible to invest in mutual funds in India using a bank account that is active outside of India.

3) Other Requirements

Non-Resident Indians are also required to submit their FACTA and CRS selfdeclarations.

The application may be obtained from the websites of AMFI, any MF, or KRA. You should provide the required paperwork, such as your PAN, passport, and evidence of your international residency. In many circumstances, an in-person verification can be conducted online or by the advisor or Indian embassy in the country of domicile.

Mutual Fund Taxation for NRIs

1) Equity Mutual Funds

Short-Term Gains – 15% of profits are subject to taxation.

Long-Term Gains – Gains up to Rs 1,000,000 per year are tax-free.

Gains exceeding this threshold are subject to a 10% tax.

2) Non Equity Funds

Short-Term proceeds – 30% of the gains are taxed as income.

Long-Term Gains – If it is a listed mutual fund, 20% of the gains are taxable (with indexation).

In the case of unlisted mutual funds, 10% of gains are applicable (no indexing).

3) Fixed Maturity Plans

If the FMP matures in less than three years, tax is due according to the individual’s income tax bracket.

Long-term capital gains are taxed at 10% without indexation and 20% with indexation.

Nominees and Joint Ownership

1. NRIs can jointly invest in mutual funds in India with another NRI who complies with KYC requirements. (his/her banking information is not required)

2. A Non-resident Indian may designate an NRI or a resident Indian as nominee for his mutual fund investments.

There are numerous MF firms that offer a variety of schemes. As an NRI, you should invest in the appropriate funds. The decision depends on variables such as the fund’s performance, your financial situation and requirements, the investment cost, and market conditions.