Home / Mutual Funds / News /  Why US, Canada NRIs face these restrictions in mutual fund investments in India

Are you a non-resident Indian (NRI) looking to invest in mutual funds (MFs) in India? The process of mutual fund investments (those who are not from the USA and Canada) are just as easy for NRIs as they are for locals in India. You have to invest via a Non-Resident Externa (NRE) or Non-Resident Ordinary (NRO) denominated account of any bank in India.

Talking on why US and Canada NRIs face certain restrictions while investing in mutual funds in India, Amit Gupta, MD, SAG Infotech said ‘this is due to the onerous compliance requirements Foreign Account Tax Compliance Act (FATCA)’.

On 9 July 2015, India and the US agreed to an Inter-Governmental Agreement (IGA) to enhance international tax compliance and adopt FATCA due to which, mutual fund companies stopped accepting investments from the US and Canada.

After consulting with fund companies and specialists, many have resumed their investments from these countries but with some restrictions.

“For instance, whereas L&T Mutual Fund does not permit such investments in close-ended funds, ICICI Prudential AMC, Birla Sun Life Mutual Fund, and SBI Mutual Fund allow the same only through offline mode of transactions with an additional signed declaration by the client," said Gupta.

“Any financial institutions are required to provide the US government with information about all transactions involving US individuals, including NRIs. FATCA makes sure that there isn't any intentional tax evasion on the revenue that US citizens make abroad," said Manoj kumar Dalmia, Founder and Director, Proficient equities Private limited.

Archit Gupta, Founder and CEO, Clear also said that restrictions are applicable to residents of the US due to FATCA “Compliance with FATCA requires certain entities to seek self declaration from investors about their nationality and residential status with respect to taxes. This is to determine whether or not they are tax residents of the US and whether they are in compliance or not. Such data may be exchanged between tax authorities to ensure compliance. This requires financial institutions to carry out additional compliance and reporting and therefore they may place additional steps before NRIs from the US can invest in India," said Archit Gupta

Additionally, RBI and SEBI also impose certain restrictions on investments made in India by NRIs, he added.


Sangeeta Ojha

Sangeeta is a Chief Content Producer at Livemint. Writes on personal finance, banking and real estate. She has over 12 years of experience as a journalist with television and digital media
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