Are NRIs allowed to invest in mutual funds in India?
Non-resident Indians (NRIs) can invest in mutual funds in India. They must follow certain rules under the Income Tax and Foreign Exchange Management Act (FEMA). Additionally, they need to complete a few simple steps.
Two Types of Investments for NRIs
- Repatriable Basis: This allows NRIs to send their invested money back to their home country in foreign currency. To do this, they must have an NRE (Non-Resident External) account in an Indian bank.
- Non-Repatriable Basis: In this case, the money stays in India, and NRIs use an NRO (Non-Resident Ordinary) account for such investments.
Mutual fund companies in India cannot accept foreign currency directly, so having an NRE or NRO account is necessary.
NRIs cannot invest in mutual funds using foreign currency. When it comes to taxes in India, NRIs are taxed in the same way as Indian residents*, but they are subject to a higher TDS (Tax Deducted at Source) rate. This means that the mutual fund house will deduct the tax at the highest applicable rate. Keep in mind that TDS is not applied to Resident Indians.
Benefits of Investing in Mutual Funds for NRIs
- Manage Investments from Anywhere: NRIs can manage their investments online from anywhere in the world.
- Diversification: Mutual funds help NRIs spread their investments across different assets like stocks and bonds.
- Variety of Funds: NRIs can choose from equity, debt, and hybrid funds based on their goals and risk preferences.
It’s also important to know that Some countries, like the US and Canada, have laws that restrict their residents from investing in Indian mutual funds due to regulations like FATCA (Foreign Account Tax Compliance Act). As a result, some mutual funds do not accept investments from NRIs living in the US and Canada, or they may require extra paperwork. However, NRIs from other countries can invest freely in Indian mutual funds.
A good mutual fund distributor understands NRI client investments and can help you stay on the right path and grow your money safely. Their expert advice is key to making smarter investment choices. In short, a mutual fund distributor makes investing easier and more profitable for you.
All of the above information is provided solely for educational and illustration purposes only.
