It is well-known that NRIs willing to accumulate wealth in their home country can invest in Indian MFs. A non-resident Indian (NRI) — a person residing outside India but a citizen of India (or a person of Indian origin), defined as per the Foreign Exchange Management Act (FEMA), 1999 — can invest in mutual funds in India, without having to obtain any kind of special approval from any of the regulatory bodies. These investments can be made on repatriable or non-repatriable basis, at the choice of the investor.

However, investments have to made in Indian rupee, through an NRE- (Non-Resident External)/NRO- (Non-Resident Ordinary) bank account in India. NRIs can also open joint accounts with resident Indians and be their nominees too. But, there is many a slip between the cup and the lip. Here, we tell you what NRIs living in the US and Canada, who form a bulk of the overseas residents’ pie, can expect when they want to invest in Indian mutual fund schemes.

Stricter rules

While KYC compliance process for NRIs can be slightly more cumbersome than for resident Indians, fintech apps have made these relatively easier for NRIs as well. But the story is not the same for NRIs based in the US or in Canada.

Out of the 40-odd fund houses in India, many do not accept investments from NRIs residing and earning income in the US and Canada, at all. This includes popular names such as Mirae Asset Mutual Fund, SBI Mutual Fund, Tata Mutual Fund, and Canara Robeco Mutual fund. Many schemes of these fund houses are among the top-rated funds in various categories. Thus, NRIs based out of the US and Canada are left with sub-par choices in many cases.

This is due to the cumbersome compliance requirements under FATCA or Foreign Account Tax Compliance Act. Under FATCA, it is compulsory for all financial institutions to share the details of transactions involving US citizens, including NRIs with the US Government. The compliance requirements do not just end with on-boarding but are also extended throughout the investment period. This is to ensure that there is no deliberate tax evasion by US citizens on income generated overseas.

Following this, currently, only a handful of fund houses accept mutual fund investment from NRIs residing in the US and Canada. While the available AMC options are already low for US and Canadian NRIs, there are other strings attached to the ones that permit investments from such NRIs. And mind you, fund houses keep changing these rules from time to time, so one needs to keep a tab on these with their respective AMCs.

Also read: TDS on capital gains for NRI investing in MFs with power of attorney

Conditions apply

Currently, only a few fund houses accept mutual fund investment from NRIs residing in the US and Canada. These include Aditya Birla Sun Life Mutual Fund, UTI Mutual Fund, ICICI Prudential Mutual Fund, L&T Mutual Fund, Kotak Mutual Fund, Parag Parikh Financial Advisory Services (PPFAS) Mutual Fund and Sundaram Mutual Fund.

Along with the heavy paperwork required for NRI investors, US and Canadian residents have to submit additional declarations, to comply with FATCA requirements.

In today’s fast-paced digital world, many fund houses restrict investments from NRIs based in the US or Canada to the offline mode. One has to submit physical applications at the branch office of the fund house, either directly or through their Power of Attorney. Besides, even within these, certain fund houses such as Quant Mutual Fund, Axis Mutual Fund, Kotak MF and PPFAS, allow investments from NRIs based in the US and Canada only when the client is present in India at the time of making any transaction (purchase, switch, redemption, etc).

ICICI Prudential MF doesn’t accept investment from residents in Canada. NRIs based in the US can apply in the physical mode.

For now, Aditya Birla MF allows investments from NRIs based in the US and Canada, online, on their website. For those relying on MF aggregator apps such as Kuvera, Groww, etc, options are more narrow. For instance, on the Kuvera platform, only Sundaram Mutual Fund, UTI Mutual Fund and L&T Mutual Fund reliably allow online investments from US/Canada-based NRIs.

Also read: How can NRIs invest in Indian mutual funds