How Can NRIs invest in Mutual Funds| North Loop Official Blog
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29 Oct 2020

How Can NRIs invest in Mutual Funds

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Can NRI buy a mutual fund in India?

As an NRI, you are allowed to invest in mutual funds in India if you follow the rules and guidelines laid down by the Foreign Exchange Management Act (FEMA). You are also required to open an NRE or an NRO account to begin your investment journey in the country.

Investing in mutual funds can help you to create a diversified portfolio with a mix of debt and equity securities and also get a fixed income investment avenue with high-interest rates. Now that we have provided an answer to the most common question of ‘can NRI buy mutual fund in India’, let us now take a look at the benefits you receive if you buy Indian mutual funds and the different ways in which you can do so.

Benefits -

The benefits you can enjoy if you buy Indian mutual funds are as follows -

Easy to manage funds online - One of the best advantages of investing in mutual funds in India is that with the onset of digital investing options, it has become much easier to track and manage all your mutual funds. At North Loop itself, we offer a digital banking and investment platform and allow you to buy, redeem, as well as switch between mutual funds online. You do not have to issue physical cheques, DDs, submit forms or even be present in India to invest in mutual funds via North Loop. So if you have been wondering how to track all mutual funds in one place or how to invest in them, opting for an online platform can make your job much more effortless. The asset management companies or AMCs also post portfolio disclosures online to keep you informed. Moreover, all your account statements also get sent to you via email. Digital investing has made it immensely easy to buy mutual fund in India directly without much hassle. So instead of wondering how to track all mutual funds in one place or if it is possible to do so, you should begin investing on a platform like North Loop.

More scope of profits - If the value of rupee surges against your resident country’s currency, you can attain more profits. That also applies when you buy mutual fund in India directly from your country of residence.

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Investment procedure -

Self/Direct - If you are thinking about how to buy direct mutual funds India, let us tell you that you can do that through your regular banking channels. While applying, along with the requisite KYC details, you also have to specify whether the investment can get repatriated or not. The mandatory KYC documents include your latest photographs, attested copies of PAN card, passport, residence proof and recent bank statements. You may also need to complete an in-person verification that can get done through online video conferencing or by visiting the Indian Embassy in your resident country.

Power of Attorney (PoA) - Another answer to your query of ‘how to buy direct mutual funds India’ is that you can do so via a Power of Attorney. Mutual fund companies in the country allow attorney holders to invest on your behalf and make decisions on the investments. However, a crucial thing you should remember is that both your and the PoA’s signature should be present on your KYC documents.

Mutual fund regulations for NRIs -

KYC - It is mandatory to get KYC compliant before you can begin investing in Indian mutual funds.

FIRC (Remittance Certificate) - It is necessary to attach a foreign inward remittance certificate if you make a payment via a cheque or a draft. However, if that is not available, you can submit a letter from the bank confirming the source of funds.

Redemption - When you redeem the fund units, the AMC credits the investment along with the gain to your account after the deduction of applicable taxes. You may also receive a cheque for the same. Many banks also allow crediting of the redemption amount directly to your NRE/NRO bank account.

Taxation -

Debt Funds - In the case of debt funds, if you sell your mutual fund investment within three years, the earnings get considered as short term capital gains and taxed at the rate of 30%. However, if you sell it after three years, it gets taxed at 20% with indexation benefits.

Equity Funds - If you sell your equity mutual funds in less than one year, the returns get treated as short term capital gains and get subjected to tax at 15% (plus 4% cess). If you redeem after one year, they get considered as long term capital gains and the gains over Rs.1 lakh get taxed at 10% (plus 4% cess), without any indexation benefit.

List of fund houses that accept NRI investments -

Birla Sun Life Mutual Fund.
SBI MutualFund.
UTI MutualFund.
ICICI Prudential MutualFund.
DHFL Pramerica MutualFund.
L&T MutualFund.
PPFAS MutualFund.
Sundaram MutualFund

Double Tax Avoidance Agreement (DTAA) benefit -

As per DTAA, an income can either become tax-exempted in any one country or taxed at a lower rate in your home country. Since, India has signed a DTAA with several countries like the USA, UAE, UK etc., you can take the help of this treaty to claim credit for taxes paid in your foreign-resident country. That can help you eliminate double taxation on the interest income earned on your NRO bank account.

Conclusion -

Mutual funds offer good long-term returns and also help in diversification of the portfolio. You can use our digital investment services to enjoy a hassle-free mutual fund investing experience and also get the help of professional mutual fund advisors to choose funds that best suit your needs.

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This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended be advice. You must obtain professional advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax, investment or other professional advice from North Loop or its affiliates. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date. All opinions expressed do not reflect the views of North Loop nor are endorsed by North Loop.