What NRIs need to know about investing in mutual funds in India

An Indian citizen or a person of Indian origin residing out of India is termed a Non resident Indian (NRI).

NRIs are allowed to invest in mutual funds in India on a repatriable or non-repatriable basis subject to regulations prescribed under the Foreign Exchange Management Act (FEMA).

Application form filled and signed by the NRI must be submitted at official points of acceptance.

It must be accompanied by payment instrument drawn in favour of scheme. The applicant must indicate whether the investment is being made on a repatriable or non-repatriable basis.

KYC papers and copy of PAN must be given.

A power of attorney (POA) holder can open and operate a mutual fund account on behalf of an NRI. To operate the mutual fund account, the POA has to be registered with the mutual fund.

The POA holder has to submit the original copy of the POA or a duly notarised copy of the POA.

The POA must be duly executed with signatures of both the NRI as well as the POA holder.

If investment is on a repatriable basis, the payment instrument must be drawn on NRE or FCNR account of the investor.

Investments on non-repatriable basis can be made by drawing payment instrument on NRE/ FCNR/NRO account of investor.

Redemption proceeds (after deduction of taxes) are paid in rupees by cheque to the account number provided. Some banks also offer direct credit of redemption proceeds to the NRE/NRO account.

If investments are made on non repatriable basis, redemption proceeds shall be credited to NRO account.

Tax is deducted at source on capital gains made on investments by NRIs. Investments in equity funds held over 1 year are exempt from tax and hence no tax is deducted at source.

A digitally signed TDS certificate is sent along with the redemption proceeds.

The investments carry the right of repatriation of capital invested and capital appreciation only till the investor remains an NRI

Overseas address is a mandatory field that requires to be filled in the mutual fund application made by a NRI.

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