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Mutual Fund Investment Options in India for NRIs - Fincash

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Mutual Fund Investment Options in India for NRIs

Updated on April 12, 2024 , 1316 views

Mutual Funds in India are gaining immense popularity since the past few years. It is a great way to grow your money in the long run. Non-Indian Residents (NRIs) who are planning to invest in Mutual Funds in India, you are at the right place to know the details on investment options in India. NRIs based in the US and Canada, there are some fund houses in India that allow you to invest in Mutual Funds in India. Non-US-and-Canada based NRIs can invest in across Asset Management Companies in India. Let's understand the KYC procedure to begin your Mutual Fund investments in India, Taxation for NRIs along with the Best Performing Mutual Funds schemes to invest 2024 - 2025.

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NRE, NRO, FCNR Accounts for Investment in India

To invest in Mutual Funds in India one is supposed to open any of the following accounts with an Indian Bank:

NRE Account

This is Non-Resident External (NRE) account which can be in the form of savings, current, fixed or Recurring deposit. You need to deposit the foreign currency in this account. To be able to deposit Indian currency, you must open NRO account. There is no upper limit on the transaction amount in an NRE account.

NRO Account

The NRO or Non-Resident Ordinary account is in the form of savings or current account that is meant for NRIs to manage their Income earned in India. In NRO account, foreign currency gets converted into Indian rupees after it gets deposited. An NRO account can be held jointly with another NRI as well as resident Indian (close relatives).

FCNR Account

This stands for Foreign Currency Non-Repatriable account deposits. In this account, NRIs can remit their Earnings in one of the six currencies such as Canadian $, US$, Euro, AU$, Yen, and Pound. Funds can be transferred from other FCNR or NRE accounts. In FCNR, the principal and interest don’t accrue any tax.

Once you open any of these accounts, you need successfully complete your KYC (Know Your Customer), under KYC norms, which is set by SEBI (Securities Exchange Board of India). One can complete their KYC with any of the SEBI-registered intermediates.

Mutual Fund Options for NRIs based in US and Canada

NRIs based in the USA and Canada would be able to invest in only some of the Mutual Fund Houses in India. Many AMCs in India are yet to allow investments from NRIs based in USA or Canada. This is due to the complex compliance requirements under Foreign Account Tax Compliance Act (FATCA). Under FATCA, all the financial entities like mutual fund houses, Insurance companies, banks are supposed to furnish their client information to the Government of India that will further be shared with the US/Canadian Government.

Since the time FATCA have come into place, many AMCs have stopped accepting investments from NRIs based in the US and Canada as it involved a lot of paperwork and compliance on the part of AMCs.

These are the list of the following AMCs that accept investments from US/Canada based NRIs:

Each of these AMC has a different condition to accept investments from US or Canada based NRIs. Some of the fund houses amongst these accept investments only in paper application forms, whereas a few may accept online application through NSE NMFII or BSE STARMF platform etc.

Following are some of the best performing schemes from the above mentioned fund houses that accept NRI investments from US & Canada:

Fund3 MO (%)6 MO (%)1 YR (%)3 YR (%)5 YR (%)2023 (%)Sub Cat.
L&T Emerging Businesses Fund Growth 3.616. Small Cap
L&T Infrastructure Fund Growth 9.424.357.733.521.350.7 Sectoral
Sundaram Infrastructure Advantage Fund Growth 11.22858.529.820.841.7 Sectoral
UTI Transportation & Logistics Fund Growth 13.229.76129.219.340.1 Sectoral
Sundaram Small Cap Fund Growth 31652.629.122.345.3 Small Cap
L&T India Value Fund Growth 824.553.528.121.239.4 Value
UTI Infrastructure Fund Growth 9.428.254.627.419.438.2 Sectoral
Sundaram Mid Cap Fund Growth 6.323.256.326.719.440.4 Mid Cap
UTI Core Equity Fund Growth 6.92047.92518.934.4 Large & Mid Cap
L&T Business Cycles Fund Growth 10.22547.224.818.731.3 Sectoral
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 12 Apr 24

Best Mutual Fund Schemes for NRIs based in Other Countries

In case of Non Residents from other countries, i.e. other than based in US or Canada, the Investing procedure is quite simplified. You can invest in any of the mutual fund houses in India. To ease your investments, we have shortlisted some of the best performing mutual fund schemes that you can prefer investing in.

Fund3 MO (%)6 MO (%)1 YR (%)3 YR (%)5 YR (%)2023 (%)Sub Cat.
SBI PSU Fund Growth 2048.296.243.923.554 Sectoral
ICICI Prudential Infrastructure Fund Growth 1434.465.64326.844.6 Sectoral
HDFC Infrastructure Fund Growth 11.331.981.741.920.255.4 Sectoral
Invesco India PSU Equity Fund Growth 17.846.188.34127.154.5 Sectoral
BOI AXA Credit Risk Fund Growth Credit Risk
Nippon India Power and Infra Fund Growth 13.133.57739.226.358 Sectoral
Franklin Build India Fund Growth 11.832.673.437.924.151.1 Sectoral
Motilal Oswal Midcap 30 Fund  Growth 8.42862.537.626.641.7 Mid Cap
DSP BlackRock India T.I.G.E.R Fund Growth 12.630.269.837.224.949 Sectoral
Invesco India Infrastructure Fund Growth 14.437.372.936.427.551.1 Sectoral
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 12 Apr 24

Comparison between NRO, NRE & FCNR Account

Parameters NRE Account NRO Account FCNR Account
Purpose NRE is an account of an NRI to transfer foreign earnings to India NRE is an account of an NRI to transfer foreign earnings to India NRIs can remit their earnings in one of the six currencies such as Canadian $, US$, Euro, AU$, Yen, and Pound
Current account & Savings Account Yes Yes No, these are FD accounts
Joint Account with NRI Yes Yes Yes
Joint Account with Resident Indian Yes, with close relatives only Yes Yes, with close relatives only
Income generated in India can be held? No Yes No
Funds can be transferred to any Bank in India? Yes Yes No
Repatriation Yes No. Only interest income generated from deposits can be repatriated Yes
When settled back in in India permanently Account gets converted to resident account Account gets converted to resident account Account gets converted to resident account

KYC Procedure for NRIs to Invest in Mutual Funds

To successfully complete your KYC procedure, NRIs need to complete certain important steps and furnish documents like:

a. KYC Form

An NRI needs to submit the KYC Form with all the necessary details filled to the SEBI registered intermediate. The documents can be sent by courier/post to the intermediate.

b. Documents

Following are the necessary documents that need to be submitted:

  • Overseas address proof
  • Indian resident address proof
  • A recent photograph
  • Passport copy

In case of NRIs in the Merchant Navy, a mariner’s declaration or certified copy of Continuous Discharge Certificate must be submitted.

c. Attestation

NRIs or PIOs (Person of India Origin) can get the above documents attested by the authorised officials of overseas branches of scheduled commercial banks registered in India, judge, court magistrate, public notaries, or the Indian embassy/consulate general in the country that they are located.

d. In Personal Verification (IPV)

As per SEBI rules, IPV is mandatory for KYC process. The intermediate should conduct the IPV of NRIs/PIOs.

Please note that all the above documents/proofs while submitting should be in the English language.

Taxation on Mutual funds for NRI Investors

Capital Gains Tax Rates on NRI Mutual Fund Investments for the Financial Year 2017-18 (Assessment Year 2018-19) are as below:

Gains Equity Linked Funds Debt Linked Funds
Tax on Short Term Capital Gain 15% As per Tax Slabs of NRI
Tax on Long Term Capital Gain (with Indexation) NIL 20%
Tax on Long Term Capital Gain (without Indexation) NIL 10%
STCG & TDS Rate 15% 30%
LTCG & TDS Rate Nil 30% On listed funds- 20% (with indexation), unlisted funds- 10% (without indexation)
All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.
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