Are you a N.R.I. & a home-sick investor? Want to invest your surplus funds in Indian Mutual Funds? Feeling stuck?
Here are some tips:
Recently
Mrs. Deepti Rai, the U.S.A. based NRI. got a comprehensive financial
plan made for her. In the financial plan, her financial planner provided
her with a list of Indian Mutual Fund schemes for the purpose of
investment, the way he suggests his Resident Indian clients. Acting on
his advice, she started contacting the mutual fund houses. Little did
she know that most of the fund houses in India would turn down her
request.
She wondered, what could be the reason?
In
India many fund houses do not to accept investments from NRI’s who are
based in the US, as according to the Dodd-Frank Act of the US, it
requires fund managers handling over 15 US-based investors are required
to register with the US regulators and follow their rules. Now if any
fund house allows these NRIs and subsequently acquire more than 15 US
based NRIs, they will have to register with the USA’s regulators and
along with SEBI of India, thus facing the hassle for following dual
regulations.
To avoid such a situation, most of the fund houses
don’t accept investment from N.R.I’s from the US. But if you are a non –
USA based NRI or from a country where no such dual regulation is
required, investing in mutual funds is not a very tough task.
Thus leaving NRIs like Mrs. Rai disappointed.
But she need not disappoint, what are the options before her?
Either she should face the music with a sulky face or she can get up and dance, auntyji!
We will tell you how she can practice second option (get up & dance).
These are:
Select mutual fund houses which allow investment from NRI’s of he USA:
There are some players in the mutual fund industry that do allow the
USA based NRI’s to invest with them like HDFC Mutual Funds, Reliance
Mutual Funds, etc. She should study their schemes and decide the best
one according to her needs.
Invest in direct equity through the Portfolio Investment Scheme (PIS):
She will have to open an NRE or a NRO account and then submit PIS
application form in prescribed format for designating that particular
account (NRE/NRO) as PIS Account on repatriation/non-repatriation basis
depending upon weather it is NRE or NRO account and start investing in
equity directly. After opening a NRE/NRO account the next thing to do is
to open a De-mat account with any brokerage firm of choice. The NRIs
should come compulsorily take delivery of the shares they invest in,
hence they can sell these shares only after two days after the trade
day.
Invest in IPO’s: NRIs like Mrs. Rai can
invest in Initial Public Offerings (IPO’s). In case of IPO’s it is not
necessary to be covered under portfolio investment scheme. It is the
responsibility of the company offering the IPO to inform the RBI how
much number of shares they are allotting to NRIs. However the she needs
to have NRE/NRO account to subscribe to these IPOs. These allotted
shares can be sold without a PIS account.
Other things to do:
Now
that the investments are done and now the NRI should keep a track of
the money invested. The market, as we know changes, so can the analysis
of what was a good investment that we made can also change. We may
decide to change funds, redeem funds and make fresh investment in the
same schemes. Now it will be cumbersome for the NRI to keep track of all
these factors. He/She can assign a power of attorney, who can transact
on behalf of the NRI. Mutual funds do allow a power of attorney to take
decisions on the NRI’s behalf. The procedure for assigning a Power of
Attorney to a fund is quite simple too.
Lastly, the NRI should
consider tax liabilities in India and also of the country he/she is from
of that particular financial year, as we know taxes grow without rain.
Despite of so many different things to keep in mind, investing in India
for a NRI is not really a Herculean task.
