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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Related FAQs

Can NRIs invest in mutual funds in India?

Yes, any NRI can invest in mutual funds in India, if they follow some certain conditions under Foreign Exchange Management Act or FEMA Act 1999.

Can I trade or invest Rs 100 in the share market of India?

You can definitely trade or invest Rs 100 in Indian stock markets. There are no monetary requirements to enter the stock market hence you can buy any share that is trading under Rs 100. Apart from direct stock investing/ trading, there are some indirect ways to own shares over Rs 100. This can be done through Mutual Funds.

What is Karvy KRA, KYC, FATCA Status?

KRA is an abbreviated short form of KYC Registration Agency whose primary job is to collect and maintain KYC records of individuals on behalf of SEBI registered financial market participants mainly Mutual Funds companies, NBFC, Brokers etc.

Can a retail investor buy Government Securities?

Government securities include both T-Bills (Treasury Bills) and Government bonds which are both short and long-term instruments issued by the Central & State governments for various purposes. Retail investors are allowed to invest in G-Secs provided by the RBI. One can buy them directly from the Stock exchanges in a non-competitive method.

Can NRI invest in Indian stock market?

Yes, NRIs can invest in Indian stock market. It is essential for the individual to check if he is considered as NRI or not according to the norms of the government. If yes, only then he can invest. There are also certain rules and regulations that must be followed.

Can foreign nationals invest in Indian Mutual Funds?

Yes, foreign nationals can invest in Indian mutual funds. They can either invest by direct route, which requires them to open a demat account, or by indirect route through Unit Confirmation Receipts (UCR).

Can foreign nationals invest in Indian Stock Market?

Yes, foreign nationals are allowed to invest in the Indian stock market. Individuals can invest under the category of Qualified Foreign Investors, and Institutional investors can do so under the category of Foreign Institutional Investor (FII).

What is CAMS: KRA, KYC, FATCA Status?

A KRA is mandated to collect and maintain KYC records of investors on behalf of financial market participants registered with SEBI. Computer Age Management System (CAMS) is a registered entity with the SEBI was setup in 1993 as a registrar to Mutual Fund companies and now serves almost close to 60 percent of the industry. Foreign Account Tax Compliance Act is an agreement between India and United states to achieve greater tax compliance between both countries.

Can a foreigner invest in India?

Yes, a foreigner can invest in India only thorough government-regulated channels. Let's learn about some of the investment alternatives.

Can NRI invest in Mutual Funds in Zerodha?

Yes , NRI can invest in Mutual Funds in Zerodha by opening a non-PIS account. However, there are restrictions for NRI investors with PIS accounts, as well as investors based in the US and Canada; they are not permitted to invest in mutual funds in Zerodha.