How can an NRI invest in an Indian mutual fund?

How can an NRI invest in an Indian mutual fund?

by 5paisa Research Team Last Updated: 2022-07-11T15:13:33+05:30

There are a few differences when it comes to an NRI investing in mutual funds in India. Here is a comprehensive guide for NRI investors.

Indians residing overseas who want to invest in India encounter several challenges since the procedure is far from simple. Most registered mutual fund firms with operations in India in the United States do not normally accept investments made by Indians who are already residing in the United States because they must maintain a quota on the number of non-resident investors they can accept.

Dodd-Frank Act, the US Wall Street Reform and Consumer Protection Act requires fund managers to register with the regulator and abide by their guidelines. As a result, if the fund manager manages more than 15 NRI accounts, they must register with the regulator and obey their guidelines. As a result, to avoid this, many fund firms do not normally accept investments from NRIs. Such NRIs might consider investing in India-specific mutual funds domiciled in the United States. However, because there aren't many funds doing so, it makes it more difficult to finance the best.

If NRIs want to invest in India, they can do so by following the processes outlined below:

Check if you have NRI status

An NRI is a person residing outside India who is either a citizen of India or Indian origin, according to the FEMA (Foreign Exchange Management Act) of 1999. However, according to the Income Tax Act of India, if a person has not resided in India for 182 days or more, or if a person's stay in India is more than 60 days but less than 182 days in a fiscal year, even if their stay in India is more than 365 days in the previous four fiscal years, they are considered a Non-Resident Indian (NRI). An NRI is also someone who has been deputed overseas for more than 6 months.

Get the right bank account

The rupee must be used as the unit of account if NRIs desire to invest in India. As a result, NRIs must open either a Non-Resident External Rupee (NRE) account, a Non-Resident Ordinary Rupee (NRO) account, or a Foreign Currency Non-Resident (FCNR) account with an Indian bank for this purpose.

So, the inevitable next question is, which account is best for me? If you want your investment money and earnings to be repatriated to your home country, you need to register an NRE account. If you do not want your investment to be repatriated to your country of residence, you should register an NRO account. If you want to store assets in a foreign currency, you should open an FCNR account.

PoA for easy management

Following your initial contributions, it is typically tough to keep track of your assets and take suitable steps. As a result, having a Power of Attorney (PoA) in place makes more sense in this situation. This allows you to delegate some powers to someone in India with whom you have faith. They might be anyone, such as a friend or relative, or even your financial consultant, who is authorised to make choices on your behalf. PoA is permitted in mutual funds.

The person who will make choices on your behalf, that is the PoA holder, must provide an authenticated copy of the PoA to the fund houses. The PoA must be signed by you as an NRI as well as the PoA holder. An NRI can even appoint an Indian resident as his or her nominee in mutual funds, and vice versa. Mutual funds also allow NRIs to share ownership with an Indian resident or another NRI.


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