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Mutual fund investments are widely sought investment options among most NRIs (Non-Resident Indians). Are you an NRI who wishes to invest in mutual funds? Are you unsure about the process of investing in mutual funds? This article aims to cover the steps required for NRIs to follow to invest in mutual funds and other specifics.
Can NRIs invest in mutual funds in India?
The first question that crosses the mind of most investors is that are they even allowed to invest in mutual funds in India? To answer you question, yes, NRIs can invest in mutual funds in India providing that they adhere to the conditions laid out by the Foreign Exchange Management Act (FEMA).
What’s the procedure to invest in mutual funds?
An NRI wishing to invest in mutual funds in India must ensure that they follow the below steps:
- Set up an account
AMCs (asset management company) or fund houses do not allow investors to invest through foreign currency. The FEMA act does not allow NRIs to park their funds in savings account in India once they have received the NRI status. Hence, an NRI you must have thorough knowledge about NRE and NRO account and understand the differences between them. - Choose how you wish to invest
After opening the account, an NRI has the option to invest in mutual funds via the following methods: - Through the Power of Attorney (PoA)
As an NRI, you can have someone else invest on your behalf. In India, the fund houses permit holders to invest on the behalf of NRIs and take necessary decisions required to invest in mutual funds. However, it is important that both PoA and the NRI sign the KYC (know your customer) documents. - Direct or Self
NRIs can also choose to do their transactions through normal banking channels. You just need to submit the KYC documents along with an application that specifies whether the investment is on a repatriable basis or not. - Complete your KYC formalities
An NRI needs to submit their date of birth, a copy of their passport, address, and photo. Submitting the proof of their current address is necessary as it directs whether the NRI is a permanent or temporary resident in that country. Several AMCs also insist on an in-person verification.
What should you do if you wish to redeem your mutual fund investments?
An NRI can easily redeem their investments by through the redemption process laid out by the AMC in India. Different AMCs have different procedures to redeem mutual fund investments. Once the NRI completes the formalities laid out by the AMC, the fund house will credit the total investment corpus, which comprises of both the gains and the investment will be credited in the NRO or NRE bank account of the NRI. The fund house can also direct a cheque for the same.
Sure, the investment procedure for NRIs to invest in mutual funds in India is a bit time-consuming. However, in the long run, the NRI would be likely to be benefitted from the returns generated by their mutual fund investments. Happy investing!