Important guidelines for NRIs investing in mutual funds in India: Compliance and opportunities

Can NRIs  invest in mutual funds in India? To put it simply, yes, you can invest in mutual funds schemes in India as an NRI. Maul funds are almost as within reach to NRIs as they are for residents in the country.

All the transactions will be in INR (Indian National Rupees) when you invest in mutual funds. The following are the bank account types among which you may choose one when you are looking to invest in mutual funds:

• Non-resident external rupee account
• Non-resident ordinary rupee account
• Foreign currency non-resident account

• There are rules and regulations, different from those from Indian residents, that you need to be aware of as an NRI if you want to invest in mutual funds.
• There are specific sectors that are banned for NRIs who want to make investments.
• The stock market remains unpredictable when you invest as an NRI as well. 

The self-attested photocopy of the following documents are required to start investing in India as an NRI:

• Your recent photograph
• PAN card
• The certified copy of your passport
• Your PIO/OCI card
• Proof of your residence outside of India, and your permanent address proof (which could be of any global nation)
• One month’s bank statement of the bank account that you would be using for the investments

The above documents would be required to ensure that you are KYC-compliant.

All the transactions will be in INR (Indian National Rupees) when you invest in mutual funds. The following are the bank account types among which you may choose one when you are looking to invest in mutual funds:

• Non-resident external rupee account
• Non-resident ordinary rupee account
• Foreign currency non-resident account

Income generated will be compliant with the tax laws of India.

Short term gains

Equity mutual funds: You will have to pay 15% as tax if investment is redeemed within one year.

Debt mutual funds: The tax rate is based on your income tax slab if the investment is redeemed within three years.

Long term gains

Equity mutual funds: There are no taxes that need to be paid if you are redeeming the investments after one year from the day of the investment.

Debt mutual funds: In case of redemption post three years from the date of investment, a 20% tax is applied on the gains with indexation benefit.

Every individual country’s taxation laws determine the taxes that you will be liable to pay in the country where you are residing. 

The IMF predicts that India will be growing in the years ahead. A World Bank report says the same thing as well. China’s official media has stated in one of their articles that India is on its way to become the “factory of the world”.

The world economy has not been doing too well. In such clouded times, the Indian economy shines like the silver lining. It has been constantly rated among one of the fastest-growing countries in the world. Global investors are therefore lining up to bet on India. It is hardly a surprise, therefore, that retail investors also want a piece of the cake.

Also read: How Mutual Funds Are Taxed For NRIs in India

NRIs from Canada or the USA cannot make investments in all the Indian mutual funds. Specified funds need you as an investor to be physically present in India while making the investments. This also means that such investors cannot do SIPs.

• NRI investors are forbidden from making investments in specific sectors as mandated by the RBI. Also, heavy fines are imposed on investing in these specified sectors.
• Certain instruments in the stock market are not open for any external investments.
• You cannot participate in intraday trading being an NRI.
• There are certain caps and ceilings when it comes to investing as an NRI.

When you want to invest in mutual funds as an NRI, it is of utmost importance for you to be aware of and adhere to the various rules associated. You may consult an expert or a financial consultant if you are confused regarding certain things.

The Bajaj Finserv Mutual Fund Platform offers more than 1,000 mutual funds that you can choose from. Additionally, you may use the mutual fund calculator on the platform to compare mutual funds.