Bringing It Back To Bharat – A Smart NRI's Guide To Mutual Fund Investments In India

With India poised to become the third-largest economy by 2028, mutual funds have emerged as a powerful tool for investment and wealth creation. Thanks to strong economic fundamentals and a growing financial ecosystem, mutual funds are increasingly attracting attention-not just from residents, but from the Indian diaspora as well.

But a common question arises: Are mutual funds in India available only for resident Indians? The answer is no. Non-Resident Indians (NRIs) can also invest in Indian mutual funds, provided they comply with the regulations laid out under the Foreign Exchange Management Act (FEMA).

How Can NRIs Invest In Mutual Funds In India?

1. Set Up an NRE or NRO Bank Account
Under FEMA regulations, mutual funds in India cannot accept payments in foreign currency. Therefore, NRIs must open either a Non-Resident External (NRE) or Non-Resident Ordinary (NRO) account, depending on their repatriation needs.

If the investment is made through an NRE account, the investment and returns are fully repatriable, meaning the funds can be transferred abroad without restriction. On the other hand, investments made from an NRO account are repatriable only up to $1 million per financial year (across all NRO accounts held by the individual in India), and are also subject to applicable taxes.

Once the appropriate bank account is in place, NRIs can invest either directly or by appointing a Power of Attorney (PoA) holder to invest on their behalf. However, it's essential that both the NRI investor and the PoA holder sign the Know Your Customer (KYC) documents to validate the arrangement.

2. Complete the KYC Process
Before investing, NRIs must complete the mandatory Know Your Customer (KYC) process. For this, investors need to submit:

A self-attested copy of their passport (only relevant pages including name, photo, date of birth, and nationality)
A recent photograph
Current overseas residential proof (temporary or permanent)
PAN card
In some cases, in-person verification (IPV) may be required by the mutual fund house

For NRIs based in the United States and Canada, the process is slightly more complex due to compliance with the Foreign Account Tax Compliance Act (FATCA). They must submit additional FATCA-related documents.

Once KYC and FATCA compliance (if applicable) are completed and verified, NRIs can start investing through platforms such as:

Official websites and apps of Asset Management Companies (AMCs)
MF Central
Registrar & Transfer Agents (RTAs) like CAMS and KFintech
BSE STAR MF platform
MFSS platform on the National Stock Exchange (NSE)
Online portals of various banks and financial intermediaries

How To Redeem Earnings From Mutual Fund Investments?

When it comes to redeeming mutual fund investments, the redemption process and timelines may vary slightly depending on the AMC. Upon redemption, the investment amount along with the capital gains-after deducting applicable taxes (like TDS for NRIs)-is credited to the NRI's designated NRE or NRO account. In some cases, AMCs may also issue a cheque if direct credit is not feasible.

It's also important to note that capital gains from mutual funds are taxable in India, and NRIs should consult with tax professionals to understand the implications in both India and their country of residence.