For Non-Resident Indians (NRIs) from Kerala looking to grow their wealth, investing in Indian mutual funds is a great option. The Indian mutual fund industry offers diverse investment opportunities, from equity and debt funds to hybrid and tax-saving funds (ELSS).
However, NRIs must follow specific rules and procedures when investing in mutual funds in India. This guide explains how Kerala NRIs can invest in mutual funds seamlessly.
Eligibility for NRIs to Invest in Mutual Funds
NRIs can invest in most mutual fund schemes in India, except for:
- PPF (Public Provident Fund) and other small savings schemes
- Certain NFOs (New Fund Offers) that may have restrictions
NRIs from Kerala (or any other state) can invest in mutual funds under the Portfolio Investment Scheme (PIS) or Non-PIS route, depending on whether they invest in equity or debt funds.
Steps for NRIs to Invest in Mutual Funds in India
1. Open an NRI Bank Account
- You need an NRE (Non-Resident External) or NRO (Non-Resident Ordinary) account to invest in mutual funds.
- The NRE account is for repatriable funds (can be transferred abroad), while the NRO account is for non-repatriable income (like rent, dividends).
2. Complete KYC (Know Your Customer) Compliance
- NRIs must complete KYC registration with a SEBI-approved KYC Registration Agency (KRA).
- Submit:
- Copy of passport
- Overseas address proof
- PAN card
- Visa/Work Permit (if applicable)
- KYC can be done online (via video verification) or offline.
3. Choose Between PIS and Non-PIS Route
- PIS (Portfolio Investment Scheme) Account → Required only for equity mutual funds.
- Must be linked to your NRE/NRO bank account.
- The bank acts as a custodian for equity investments.
- Note: Some banks charge a fee for PIS accounts.
- Non-PIS Route → For debt funds, hybrid funds, and ETFs.
- No PIS account needed.
4. Select the Right Mutual Fund
- Equity Funds – For long-term growth (e.g., large-cap, mid-cap, sectoral funds).
- Debt Funds – For stable returns (e.g., liquid funds, corporate bond funds).
- Hybrid Funds – Balanced exposure to equity and debt.
- ELSS (Tax-Saving Funds) – Offers tax deductions under Section 80C.
5. Invest Through Online Platforms or AMCs
- Use platforms like Kuvera, Groww, or AMC websites (SBI MF, HDFC MF, etc.).
- Provide NRI details and complete the investment process.
Taxation on Mutual Funds for NRIs
- Capital Gains Tax on Equity Funds:
- Short-term (held <1 year): 15%
- Long-term (held >1 year): 10% (over ₹1 lakh gains)
- Capital Gains Tax on Debt Funds:
- Short-term (held <3 years): As per income tax slab
- Long-term (held >3 years): 20% with indexation benefit
- Dividend Income: Taxable at slab rates (TDS @ 20% may apply).
Note: NRIs must file ITR in India if they earn taxable income.
Repatriation of Funds
- NRE-linked investments: Fully repatriable.
- NRO-linked investments: Only up to $1 million per year (after taxes).
Best Mutual Funds for Kerala NRIs (2024)
Here are some top-performing funds for NRIs:
| Category | Fund Name |
|---|---|
| Large-Cap Equity | HDFC Top 100 Fund |
| Flexi-Cap | Parag Parikh Flexi Cap Fund |
| ELSS (Tax Saving) | Axis Long-Term Equity Fund |
| Debt Fund | ICICI Prudential Corporate Bond Fund |
Final Thoughts
Investing in Indian mutual funds is a smart way for Kerala NRIs to grow their wealth while staying connected to India’s growth story. By following the right steps—opening an NRI account, completing KYC, and choosing between PIS/Non-PIS—you can start investing seamlessly.
Pro Tip: Consult a financial advisor to align investments with your goals and risk appetite.
Would you like recommendations based on your risk profile? Let me know in the comments!
Disclaimer: Mutual fund investments are subject to market risks. Please read the offer document before investing.