Can NRI Invest in Mutual Funds

NRI Investments in Mutual Funds

One of the most lucrative investment choices that NRIs have is investing in Mutual Funds. While the risk of investing in a mutual fund may be higher than say, a fixed deposit, its returns on investment are also proportionately high. Some of the most common queries we receive from NRIs are questions like, can NRI invest in mutual funds in India? Can NRI invest in Indian mutual funds? In addition, we also receive several queries regarding the various NRI investment options in India. You should know that a mutual fund is definitely on the top of many NRIs lists when it comes to investing their hard-earned money in India. Several NRIs also have many doubts regarding the NRI mutual fund taxation, and which laws and regulations their mutual funds are subject to. You should know that NRIs can definitely choose to invest in mutual funds in India. However, in order to fully understand the risks and the tax implications of your investments, you must arm yourself with all the requisite knowledge before making the decision to invest in a mutual fund. So, we have gathered a handy guide for you, which will answer all the basic questions that play on an NRIs mind.

What Are Mutual Funds?

A mutual fund is an investment option where money is collected from investors, and the money is invested on their behalf. The fund will charge you a small fee for handling your money. This is a good investment option for those who are looking to invest regularly but do not know how to invest directly in the market. You can choose a mutual fund based on a future goal, and start investing now to get that goal in the future. You could directly join a mutual fund or hire a mutual fund advisor to help you get started.

How To Identify Your Residential Status For The Year?

Before getting into the nitty-gritty of mutual fund investments in India, you should first identify your residential status for the year. You are an NRI for the current financial year if you meet one of the following:

  • You have lived in India for less than 182 days a financial year, and less than 365 days during the preceding four financial years.
  • A person, who has been deputed overseas for more than 6 months, also qualifies for non-resident status

Can NRIs Invest In Mutual Funds In India?

NRIs can definitely invest in mutual funds in India. There is no requirement for an NRI to get permission from the RBI to invest in mutual funds in India. You can invest in mutual funds in India in a repatriable or a non-repatriable basis. You should have an NRE or FCNR account with an Indian bank to be able to invest in mutual funds.

What is The Procedure For NRIs to Invest in Mutual Funds in India?

In order to invest in mutual funds, you can complete the application form and submit it through one of the investor centers, along with your cheque or bank draft. There is now another option of completing the procedure online as well.

You should know that investments can only be made in Rupees, and no foreign currency can be invested in mutual funds in India.

How Can You Redeem Your Earnings As An NRI?

Once it is time for you to receive returns on your investment, the amount will be deposited in your account in Indian Rupees. Depending on whether your investment is repatriable, you can then convert it to foreign currency or alternatively, choose to keep it intact.

What Are The Tax Implications For NRIs Investing In Mutual Funds?

You should know that mutual funds are treated as capital assets in India. Therefore, it could incur the capital gains tax. However, you will not have to pay taxes for dividends received by you. When it comes to capital gains tax, you will have to pay the long-term capital gains tax if you have held it for more than 12 months. Otherwise, you will be liable to pay the short-term capital gains tax. Make sure you adjust for the cost inflation index before paying your long-term capital gains tax. In addition to this, capital gains also attract TDS. But no wealth tax would be applicable for mutual funds.

We hope that this article has helped you to understand the NRI investment options in India, and NRI mutual fund taxation. After reading this article, you should have a clear understanding of what exactly a mutual fund is. If you have been wondering, can NRIs invest in mutual funds or can NRIs invest in mutual funds in India, the answer to both questions is a resounding yes? In addition, you should also have a thorough understanding of NRI mutual fund taxation policies in India. We hope this will help make your financial decisions just a bit easier. If you have any further queries regarding this topic, do drop us a comment and we will get back to you.