In recent years, India has emerged as one of the fastest-growing economies in the world, and this has attracted many Non-Resident Indians (NRIs) to invest in the country. Mutual funds are one of the most popular options for NRI investment in India. Considered one of the best investment in India for NRI, mutual funds offer a great balance between risk and returns, making them an attractive investment option for NRIs looking to earn high returns while minimizing risks. In this blog, we will discuss how NRI can invest in mutual funds and answer some common questions such as can NRI invest in mutual funds in India, how can an NRI invest in direct mutual funds, what are the best mutual fund options available for NRI in India, documents required for NRI investment in mutual funds, and more. We have also covered the tax implications and whether mutual funds are tax-free for NRIs. In our earlier blogs, we have discussed NRIs filing taxes for investments made in India and why NRIs should invest in India. Let us dive into the details of NRI investments in mutual funds.
Can an NRI invest in mutual funds in India?
Yes, NRIs are allowed to invest in mutual funds in India, subject to certain conditions. The Reserve Bank of India (RBI) has granted permission to NRIs to invest in mutual funds on a repatriable or non-repatriable basis. Repatriable basis means that the investment and its earnings can be repatriated outside India, whereas non-repatriable basis means that the investment and its earnings cannot be repatriated outside India.
How can NRI invest in direct mutual funds?
NRIs can invest in mutual funds in India through various modes, such as through their NRE/NRO accounts, through the Portfolio Investment Scheme (PIS), or through a direct investment route. For direct investment, NRIs can apply for mutual fund units by filling out the application form and submitting it along with a cheque/DD. NRIs can also invest in mutual funds online through the fund house's website or through third-party websites such as GEPL Capital and others.
Can an NRI invest in SIP mutual funds?
Yes, NRIs can invest in Systematic Investment Plans (SIP) mutual funds in India. SIP is a mode of investment where investors can invest a fixed amount at regular intervals in a mutual fund scheme. This investment mode is particularly useful for NRIs who want to invest regularly in mutual funds but do not have a lump sum amount to invest.
What are the best mutual fund options available for NRIs in India?
There are various mutual fund options available for NRIs in India, depending on their investment goals, risk appetite, and investment horizon. Some of the best mutual fund options for NRIs are:
Equity mutual funds: These funds primarily invest in the shares of companies that are publicly listed on the stock exchange. Equity funds are suitable for NRIs with a high-risk appetite and a long-term investment horizon.
Debt mutual funds: These funds invest in fixed-income securities like government bonds, corporate bonds, and money market instruments to generate regular income for investors. Debt funds are suitable for NRIs with a low-risk appetite and a short to medium-term investment horizon.
Balanced mutual funds: These funds invest in a well-diversified portfolio of both equity and debt securities to provide a balanced approach toward generating returns for investors. Balanced funds are suitable for NRIs who want to balance the risk and return of their investment portfolio.
Index mutual funds: These funds invest in a basket of stocks that mirror a particular stock market index, such as the Nifty 50 or BSE Sensex, to provide investors with returns that closely reflect the overall market performance. Index funds are suitable for NRIs who want to invest in the stock market but do not have the expertise to select individual stocks.
Documents required for NRI investment in Mutual Funds
To invest in mutual funds for NRI, it is mandatory to submit certain documents as per regulations:
NRI KYC form for mutual fund: NRIs need to submit their KYC documents, such as their passport, PAN card, and overseas address proof.
Bank Account: NRIs need to have an NRE or NRO bank account to invest in mutual funds.
PIS permission: NRIs need to obtain permission from their designated bank to invest in mutual funds in India under the Portfolio Investment Scheme (PIS).
Are mutual funds taxable for NRI?
The tax implications for NRI investments in mutual funds depend on various factors, such as the type of mutual fund, the investment duration, and the NRI's residential status. As per the current tax laws in India, short-term capital gains (STCG) on mutual funds are taxed at 15%, whereas long-term capital gains (LTCG) on equity-oriented mutual funds are taxed at 10% on gains exceeding INR 1 lakh. LTCG on debt mutual funds are taxed at 20% with indexation benefits.
However, under the Double Taxation Avoidance Agreement (DTAA) between India and the country where the NRI resides, NRIs can claim tax benefits. For instance, NRIs residing in the USA can claim a tax credit for the tax paid in India on their investments in mutual funds.
Can NRI invest in mutual funds without PIS account?
NRIs can invest in mutual funds without a PIS account if they invest through the direct investment route. However, if NRIs invest through their NRE/NRO accounts or any other bank account held in India, they need to obtain PIS permission from their designated bank to invest in mutual funds in India.
Concluding Thoughts:
NRIs looking to invest in India can consider mutual funds as an investment option. Mutual funds offer diversification, professional fund management, and the potential for higher returns. NRIs can invest in mutual funds through various modes, such as direct investment, NRE/NRO accounts, or the Portfolio Investment Scheme (PIS).
NRIs need to ensure that they comply with KYC norms and provide the required documents to invest in mutual funds. NRIs also need to understand their tax obligations in India and their resident country to optimize their investment returns. NRIs can consult with a professional financial advisor and tax consultant to identify the best mutual fund options and optimize their investment returns.
In conclusion, NRIs can invest in mutual funds in India through various modes and benefit from the growth potential of the Indian economy. To start investing in mutual funds, NRIs can open a demat cum trading account with GEPL Capital and download "GEPL Pro Markets," our online mobile trading app. Mutual funds offer a convenient and accessible investment option for NRIs, and with the right investment strategy and professional guidance, they can optimize their investment returns and benefit from the growth potential of the Indian economy. Don't wait any longer, take the first step towards investing in India today with GEPL Capital’s online mutual fund app.
