Investing in mutual funds as a Non-Resident Indian (NRI) comes with a unique set of regulations and procedures. Salonee Sanghvi, Founder of My Wealth Guide, and Kalpesh Ashar of Full Circle Financial Planners, offer a comprehensive guide to navigate these complexities.
Salonee Sanghvi emphasises the importance of confirming your NRI status before proceeding with any investments.
According to Indian regulations, you qualify as an NRI if you meet any of the following conditions:
Residency: You are an Indian citizen residing abroad or an Overseas Citizen of India (OCI) holder.
Physical Presence: You have been in India for:
- Less than 180 days if your income is below ₹15 lakh.
- Less than 120 days if your income exceeds ₹15 lakh.
- 60 days if you have been in the country for over 365 days in the past four years.
Employment or Business: You leave India for employment, business, or an uncertain period within the current year.
Once your NRI status is confirmed, Sanghvi advises updating your bank account from a resident account to either a Non-Resident Ordinary (NRO) account or a Non-Resident External (NRE) account:
- NRO Account: Manages income earned in India.
- NRE Account: Converts foreign currency earned abroad into Indian currency. Note that any amount deposited in the NRE account must be earned outside India.
For NRIs looking to invest in mutual funds, several steps need to be taken:
KYC Update: If your KYC (Know Your Customer) was initially done as a resident, it needs to be updated to reflect your NRI status. Additionally, a FATCA (Foreign Account Tax Compliance Act) declaration is required.
Investment Process: You can invest online through AMC portals and other websites, fill out physical forms, or appoint a power of attorney to manage investments on your behalf.
Regulatory Check: It’s crucial to check the investment regulations in your current country of residence, as they can vary widely.
Kalpesh Ashar emphasises that filling out the KYC form is mandatory for NRIs.
This process requires a self-attested copy of the PAN card, passport, OCI card (formerly known as PIO), and overseas address proof.
Ashar points out that the confusion around the KYC process, particularly the validation of email and mobile numbers, has been recognized by authorities.
The revised norms now accept a registered mode, allowing NRIs to proceed with their investments without needing validation.
Importantly, NRIs are not required to have an Aadhaar card for KYC purposes.
If someone has already used an Aadhaar card for validation, it’s acceptable, but it’s not necessary to obtain one specifically for KYC.
Additionally, Ashar addresses the issue of PAN-Aadhaar seeding not being synchronized. NRIs should check their status on the IT portal and update it from resident to non-resident if necessary.
This update should be done with the assistance of a chartered accountant, who can ensure the status change is properly reflected.
Once updated, this information should be provided to the Asset Management Companies (AMCs) to facilitate the investment process.
The recent simplifications in the KYC norms have made the process more straightforward, reducing the confusion that previously existed.
For full interview, watch accompanying video
Also Read | How NRIs can file income tax returns from India