NRI guide to MF investing in India

Indian people living abroad and wish to invest in India may face several issues as it is not at all a hassle-free process for them. In the US, most of the registered mutual fund companies, which have their operations in India, don’t generally accept the investments made by the Indians, who are currently living in the US as they have to maintain a cap on the number of non-resident investors they can take. 

Dodd-Frank Wall Street Reform & Consumer Protection Act of the US requires fund managers to register with the regulator and follow their rules. Therefore, if the fund manager is handling more than 15 NRI accounts, then they have to get registered with the regulator and follow their rules. Hence, to avoid this, many fund houses don’t generally accept investments from NRIs. Thus, such NRIs can consider investing via US-based mutual funds, which are India-specific. However, as there aren’t many doing so, it increases the difficulty to fund the best. 

Therefore, if the NRIs wish to invest in India, then they can very well do so by following a few steps as given below: 

Check if you have NRI status 

According to the Foreign Exchange Management Act, 1999 (FEMA), an NRI is a person residing outside India and is either a citizen of India or a person of Indian origin. However, as per India’s Income Tax Act, 1961, if a person has not resided in India for a period of 182 days or more or a person’s stay in India is more than 60 days but less than 182 days in a financial year, even if their stay in India is more than 365 days in a preceding four financial years, is a non-resident Indian (NRI). A person also qualifies as an NRI if he has been deputed overseas for more than 6 months. 

Get the bank accounts right 

If NRIs wish to invest in India, then their investments must be in rupee terms. Hence, for this purpose, NRIs need to open either a non-resident external rupee (NRE) account or non-resident ordinary rupee (NRO) account or foreign currency non-resident (FCNR) account with an Indian bank. 

So, now, the next natural question is which account is best for me? If you wish the money that you invested along with gains to be repatriated to your country of residence, then you should open an NRE account. If you wish that the investment that you are making must not get repatriated to your country of residence, then you should open an NRO account but if you wish to hold funds in a foreign currency, then you should open an FCNR account. 

PoA for easy management 

Post making your initial investments, it may become difficult for you to keep a track of your investments and take appropriate actions accordingly. Therefore, in such a case, it makes more sense to have a power of attorney (PoA) in place. This enables you to give certain rights to someone in India that you have trust in. They can be anyone, may it be your friend or relative or even your financial planner, who would be capable enough to take decisions on your behalf. Mutual funds do allow PoA. The one, who is going to make decisions on your behalf, is the PoA holder, who needs to submit the attested copy of PoA to the fund houses. The PoA must contain signatures of both, you as an NRI as well as the PoA holder. NRI can even make an Indian resident his/her nominee in mutual funds or vice versa. Mutual funds also allow NRIs to enjoy the joint holding with an Indian resident or even another NRI.