Are Non-Resident Indians Allowed to Invest in New Fund Offers in India?

Non-Residents Indians (NRIs) are permitted to invest in New Fund Offers (NFOs) of mutual funds in India, just as they can invest in ongoing mutual funds. However, several regulatory and compliance factors need to be considered, especially for NRIs resident in the US or Canada.

Regulation by FEMA

The Foreign Exchange Management Act (FEMA) enables NRIs to invest in mutual funds without any restrictions regarding whether the NFO is open-ended or close-ended. Despite this, some asset management companies may refuse investment from NRIs due to compliance issues from certain countries. Therefore, it's crucial to confirm with the specific mutual fund before proceeding with the investment.

Nationality and Residence Criteria

NRIs are defined as citizens of India who reside outside the country. According to the Income Tax Act 1961, an NRI is someone who stays in India for less than 120 days in a fiscal year. Under FEMA, NRIs are not allowed to save money in regular Indian savings accounts nor are they permitted to invest in Indian assets using foreign currency. It is hence necessary for NRIs to utilize either Non-Resident External (NRE) or Non-Resident Ordinary (NRO) accounts, depending on their needs.

Qualification and Documentation Requirements

To make direct investments, NRIs must provide necessary documentation, including Non-Resident (NRI) Know Your Client (KYC) details. These documents should include a declaration stating whether the investment is repatriable or non-repatriable, which can be significant for upcoming NFO investments. For investments made through a Power of Attorney (PoA), the NRI appoints someone else to handle investments, but both the NRI's signature and the PoA's signature must be present on the KYC documents submitted to the Asset Management Company.

Additional Documentation and Compliance Processes

NRIs from the US and Canada might need to submit additional documentation to asset management companies, especially if dealing with specific fund houses. Also, some AICs (Asset Management Companies) only process KYC documentation offline. It is advisable to verify these requirements with the mutual fund concerned.

Popular NFO Investment Example

You can explore Aditya Birla Sun Life NFO, for example, which provides details on the investment opportunity. Remember, mutual fund investments are subject to market risks, and it is advisable to carefully read the scheme-related documents available.

Important Note: All investments should be reviewed carefully, and it is advisable to consult a financial advisor or the mutual fund's guidelines before making any decisions.