How can NRIs from the United States invest in Mutual Funds in India?

Short Answer

NRIs living in the United States can invest in Indian Mutual Funds, but there are some hassles that have to be overcome. You will require an NRE, NRO, or FCRN account in order to convert the foreign currency into Indian rupees, post which you can complete the KYC and begin investing in Indian Mutual Funds.

Detailed Answer

International Investment options in India

Being an emerging market, India has lately received a lot of attention in its capital markets. Foreign investors and NRIs (Non-Resident of India) are flocking to Indian markets to get a better return on their money. For US residents, the Indian markets remain a good proposition for investment due to multiple factors like high growth in equity, currency depreciation return, etc.

Investment options for U.S based NRIs

NRIs have a wide range of investment options through which they can invest in India. Some of the commonly used investment tools are Fixed Deposits, National Pension Scheme, Direct Equity, Real Estate, Public Provident Fund, and Mutual Funds.

Mutual Funds is an ideal choice for moderate risk-taking investors as it offers higher returns than FDs and is less risky than direct equity. Let's look at how NRIs from the US can invest in Mutual Funds in India.

How can NRIs invest in Mutual Funds in India?

Mutual Funds are professionally managed portfolio of assets that allows diversification under the same asset class. Mutual funds are less riskier compared to individual stocks because the overall risk is divided into multiple stocks in the fund.

In order to invest in Mutual Funds, NRIs have to follow certain steps in order to begin investing in Indian Mutual Funds.

Firstly you need to have a combination of accounts with an Indian bank. This account includes an NRE, NRO, and FCNR account.

1. NRE Account: A NRE (Non-Resident External) account is a form of savings, current, or fixed/recurring deposit account where you can deposit foreign currency in order to buy securities.

2. NRO Account: The NRO (Non-Resident Ordinary) account allows the foreign currency to be converted into Indian rupees after it gets deposited in the account.

3. FCRN Account: Lastly an FCRN or Foreign Currency Non-Repatriable account where an NRI can transfer a total of six foreign currencies to fund a broker or AMC (Asset Management Company) that allows US investors to invest in Indian markets.

After you have all these accounts, you can complete the mandatory KYC (Know Your Customer) procedure by submitting certain documents as required by the SEBI to the respective authority. Some of the important documents are:

  • Copy of Passport
  • Overseas Address proof
  • Indian address proof
  • Recent Photograph.

After providing these documents, you might have to visit the AMC for an IPV (In-Person Verification).

NRI Investors from the US or Canada can have to furnish some additional documents due to the FATCA (Foreign Account Tax Compliance Act) guidelines and abide by the FEMA(Foreign Exchange Management Act) regulations. Under this act, the fund house requires to share all the financial transitions of NRI and US citizens with the U.S government.

Here is a list of the Mutual Fund houses that accept investments from NRIs

  • ICICI Prudential Mutual Fund
  • HDFC Mutual Fund
  • Birla Sun Life Mutual Fund
  • SBI Mutual Fund
  • UTI Mutual Fund
  • PPFAS Mutual Fund
  • L&T Mutual Fund, etc.

Conclusion

To conclude, any NRI staying in the US can invest in Indian Mutual Funds easily only by completing certain documentation and abiding by certain tax-related laws. Once your application is approved by the AMC, there are a plethora of options to choose from. On the other hand, you will also from the rupee depreciation, and you will be taxed based on your holding period (Short or Long term Capital Gains Tax).

Tagged With: international investingnon resident of indiamutual fundsindian stock marketequity investng
Categories: Mutual Funds
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