NRI Mutual Fund Investment Compliance: Your Essential Guide For Non-Resident Indians, the Indian Mutual Fund Industry provides a fruitful opportunity to create wealth for themselves and their families. But before taking the leap, you must first understand the framework of NRI investment compliance . Following specific regulatory guidelines ensures the investment process is smooth, authentic, and without hurdles. This presentation is your essential guide through the main eligibility criteria and regulatory considerations that every NRI must know. Main Requirements for NRI Mutual Fund Investments NRI Investment Compliance starts by completing three fundamental requirements that form the foundation of your investment journey. Each requirement plays a critical role in ensuring your investments are legally compliant and properly structured. KYC and Documentation Complete identity verification with proper documentation NRI Bank Accounts Mandatory NRE or NRO account for all transactions Tax Residency Status Updated non-resident status with authorities KYC and Documentation KYC (Know Your Customer) confirms your identity as an investor. To verify your identity according to Indian standards, you must provide comprehensive documentation that establishes both your identity and residential status. This process is mandatory before making any mutual fund investments and ensures compliance with Indian regulatory requirements. Required Documents Passport and Visa Copy Valid passport with current visa documentation Overseas Address Proof Utility bills or bank statements from country of residence PAN Card Permanent Account Number for tax identification Passport-Sized Photographs Recent photographs as per specification NRE and NRO Bank Accounts A vital rule for NRI Investment Compliance is the compulsory use of NRI bank accounts Any investment must be made through either an NRE (Non-Resident External) or NRO (Non-Resident Ordinary) account. Direct investments using foreign currency are strictly prohibited. NRE Account For foreign earnings transferred to India. Funds are fully repatriable, and interest earned is tax-free. Ideal for maintaining foreign income in India. NRO Account For income earned in India. Repatriation is limited to USD 1 million per financial year. Interest is taxable. Suitable for Indian-source income management. Choosing the right type of account is the first step in ensuring that you adhere to NRI Investment Compliance from a banking perspective. Updating Your Tax Residency Status 01 Update Bank Records Notify your bank to change account status from resident to non-resident. This affects account type, tax deductions, and transaction permissions. 02 Inform Income Tax Department File updated residential status with the Income Tax Department to ensure correct tax treatment on all investments and income. 03 Maintain Compliance Keep documentation current as your residency status determines taxation, repatriation rights, and regulatory obligations. Important: Failure to update residency status can result in incorrect tax deductions and potential compliance issues with regulatory authorities. FEMA Guidelines: The Legal Framework Foreign Exchange Management Act The Foreign Exchange Management Act (FEMA) is the cornerstone for NRI Investment Compliance as it governs all foreign exchange transactions in India, including mutual fund investments by NRIs. Following FEMA guidelines ensures your transactions are legally sound and protected from regulatory penalties. Transaction Authorization All investments must comply with authorized channels and designated bank accounts Reporting Requirements Maintain proper documentation for regulatory reporting and audits Repatriation Rules Understand limits and conditions for transferring funds overseas Country-Specific Restrictions Certain Asset Management Companies (AMCs) prohibit NRI investments from specific countries, most notably the USA and Canada. This is primarily due to stringent regulatory hurdles such as the US FATCA (Foreign Account Tax Compliance Act). High-Restriction Countries USA and Canada: Most Indian AMCs restrict investments from these countries due to complex compliance requirements under FATCA and similar regulations. Verify Before Investing Check AMC policies: Always review the specific policy of the Asset Management Company before selecting a fund to avoid investment rejection. Alternative Options Explore alternatives: Some specialized funds or platforms may accept investments from restricted countries with additional documentation. Understanding Repatriation The final step in fully grasping NRI Investment Compliance is understanding repatriation4the ability to transfer your investment proceeds back overseas. Investment Source Determine whether you invested through NRE (repatriable) or NRO (non- repatriable) account Repatriation Rights NRE investments allow full repatriation; NRO limited to $1M annually with proper documentation Tax Implications Repatriation status impacts taxation, TDS rates, and required compliance procedures Key Takeaway: Clarify your repatriation status from the beginning4it impacts your ability to move funds overseas and determines your tax obligations throughout the investment lifecycle.