Why Financial Planning?

Planning is bringing the future into the present so that you can do something about it NOW.

Whenever I ask an NRI about their investments in India – most of them share a list of properties that they have purchased in the last few years. NRIs simply have to understand Real Estate is an asset class like any other – there are pros & cons. Let me stick with Mutual Funds for NRIs here.

Few points that I have covered in this NRI Mutual Fund post:

  • NRI Mutual Fund Advantages
  • Can NRI invest in Mutual Fund?
  • How to invest in mutual funds in India NRI?
  • Mutual Fund KYC for NRI
  • Taxation of Mutual Funds for NRI
  • Repatriation of Money

mutual funds for nri

Mutual Funds in India for NRI – Advantage

Mutual fund schemes are apt investment vehicles for NRIs to invest in India. The main advantages of investing in Mutual fund schemes are –

  1. They offer a diversified portfolio which helps reduce risks and improve chances of better returns
  2. They are highly liquid. You can buy them and sell them at your convenience and as per your requirements in most cases.
  3. They are managed by professionals and so you get the benefit of expert investment decisions.
  4. You need not to have a large sum to invest in MFs.
  5. Some mutual funds offer tax savings.
  6. Easy to manage as NRIs can invest in Mutual Funds online.

List – Best Indian mutual funds for NRI

Can NRI buy Mutual Funds in India?

NRIs are allowed to invest in mutual fund schemes in India.

Availability of MF schemes for NRIs to invest

NRIs from all over the world can invest in most of the Mutual Fund Schemes in India except for some restrictions on NRIs based in US and Canada.

There are restrictions due to compliance requirements.

They can invest only in the schemes of some of the fund houses such as Birla Sun Life, DHFL Pramerica Mutual Fund, ICICI Prudential, L&T Mutual Fund, PPFAS Mutual Fund, SBI Mutual Fund, Sundaram Mutual Fund, and UTI Mutual Fund.

There are major tax & reporting issues – consult your investment advisor.

Mutual Funds for NRI

Here are the important details to understand as an NRI while investing in Mutual Funds –

Requirements for an NRI to invest in Mutual Funds

  • NRIs have to be KYC compliant to invest in Mutual funds. They have to file in for a fresh KYC even if they were KYC compliant as resident Indians.
  • NRIs need to have an NRO or NRE account for the transfer of funds to and from the mutual fund for the investment. The bank account operational in a foreign country cannot be used for Mutual Fund investments in India.
  • NRIs have to give the FACTA and CRS self-declarations too.

Mutual Fund KYC for NRI

The form can be downloaded from AMFI, any mutual fund or KRA websites. The necessary documentation such as PAN, passport and overseas residence proof should be submitted. An In-person verification can be done by the advisor or Indian embassy in the country of residence or in many cases online. (a small investment in the mutual fund is compulsory at the time of KYC)

Check – NRI Investment Options in India

How to invest in Mutual Funds in India for NRI

  • NRIs can invest through their demat account linked to the NRE/NRO account.
  • They can also open an account in an online platform such as MF Utility (MFU) and manage their investments.
  • NRIs can also buy and sell mutual fund units directly from the fund house using their online services or the paper-based application forms.

“NRI can also invest in Indian Mutual Funds by giving Power of Attorney (POA) to a family member in India.” wiseNRI

Details on investment amount and repatriation

  • Investments in mutual funds can be done in INR only. The amount has to be debited from the NRE or NRO account. Other remittances being used require a Foreign Inward Remittance Certificate.
  • Redemption proceeds on the sale of Mutual Funds shall be credited to the respective NRE/NRO bank account of the investor. The redemption will be done in INR only. Redemption proceeds of investments can be fully remitted back abroad on repatriation basis assuming the investment was done as an NRI and from an NRE account. Redemption proceeds to an NRO account cannot be repatriated easily.

Mutual Fund taxation for NRI

Equity Mutual Funds

– Short-Term Gains – 15% of the gains is payable as tax

– Long Term Gains – Gains up to Rs. 1,00,000 per year are exempt from tax. 10% tax is payable on gains over and above that amount.

Non-Equity Funds

– Short-Term Gains – 30% of the gains is payable as tax

– Long Term Gains -If it is a listed Mutual Funds, 20% of the gains is payable as tax (with indexation). In case of unlisted Mutual Funds, 10% of gains is applicable (without indexation)

Fixed Maturity Plans

– Tax on Short Term Gains

– If the FMP matures in less than 3 years, tax is applicable as per income tax slab of the individual.

– In case of long term gains, 10% tax, without indexation is applicable and 20% with indexation

You can read our detailed post on Taxation of Mutual Funds for NRI

nri mutual fund currency fluctuation

Nominees and joint ownership

  • NRIs can make joint investments in mutual funds in India with another NRI who is KYC compliant. (his/her bank details are not required)
  • An NRI can appoint an NRI or a resident Indian as a nominee for his investments in mutual funds.

There are many mutual fund houses that offer numerous schemes. As an NRI, you should pick up the right funds to invest in. The choice depends on factors such as the performance of the fund, your financial status, financial needs, cost of investment and market conditions.

If you are unsure on how to pick up the right investment, consult a professional financial adviser.

Talk to us about your Investments & Goals.

Hope this post gives you an idea about NRI Mutual Fund Investments – if you have any questions feel free to add in the comment section. If you think I have missed any major point in this post – just let me know & I will revise.

mutual funds for nri
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Hemant Beniwal

Hemant Beniwal is a CERTIFIED FINANCIAL PLANNER and his Company Ark Primary Advisors Pvt Ltd is registered as an Investment Adviser with SEBI. Hemant is also a member of the Financial Planning Association, U.S.A and registered as a life planner with Kinder Institute of Life Planning, U.S.A. He started his Financial Planning Practice in 2009 & is among the first generation of financial planners in India. He also authored Bestseller book "Financial Life Planning". 

  • Thanks. Could you please update the article with information on how PINS and non-PINS accounts work. Also mechanism and knowledge about repatriation.

  • I am currently an nri since 3 years but till now using normal saving account. I have recently invested in MF (75000 INR) and Stock (150000 INR) back from 2 months. What should I do now Can I carry on with normal saving account?

    • Hi Santosh,
      It’s illegal to hold saving account for NRIs. As per FEMA regulations, when a status changes to NRI, resident saving account have to be converted to NRO Account.
      For this, you need to inform bank within a reasonable period of time( time is not defined but you can assume up to 3 months)

    • Hi Bharat,
      Most fund houses in india don’t allow NRIs from US and Canada because of the cumbersome compliance requirement under Foreign Account Tax Compliance Act. Under FATCA, it is compulsory for all financial institution to share the details of transactions involving US citizens including NRIs with the US Govenment

  • If I would invest MF invest as NRI oci card holder , at the Maturity of term such as 5 years transfer to my NRO a/c should payable tax for returns.

  • I have just immigrated to Canada on PR. I want to know that if I invest in the stock market and the mutual fund from Canada in India will there be restrictions/ compliance issues. I have an operational Demat account in India.

  • My residence status has changed to NRI (UAE) and I have investments in Mutual Funds as resident individual. I have converted my HDFC savings bank account linked to MFU (Mutual Fund Utility) as NRO account.

    Can I change my resident status in the existing MFU CAN to NRI? If yes, then what is the procedure? If no, do I need to close the existing CAN which I opened when I was resident individual? If I am required to close my existing CAN then what will happen to my investments?

  • I have a zerodha – coin account for Mutual Fund SIP’s with auto debit from my HDFC savings NRE account in India. I have recently shifted from India to Singapore now on long term basis. Please advise on steps to undertake with both HDFC and Zerodha so I can continue with the SIPs.

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