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Are you an NRI from the UAE wondering how to invest in mutual funds from UAE in India?
You're not alone!
A study titled 'The NRIs' Investment Inflows into India – A Pulse Study' revealed that after the upcoming general elections, several UAE-based NRIs are planning to boost their investments in India. For many, the goal is a comfortable retirement back in their home country.
From the various avenues to invest, mutual funds are among the top choices. The study also showed NRIs exploring diverse asset classes like long-term investment plans, retirement schemes, and government-supported infrastructure funds.
Before going ahead, it's essential to understand the specific guidelines and rules for UAE-based NRIs. This article will guide you through the process — read on to make informed investment decisions.
Yes, NRIs can invest in Indian mutual funds from the UAE. However, they must adhere to the rules set by the Foreign Exchange Management Act (FEMA). Here are the rules:
Follow the given steps to start investing in Indian mutual funds from the UAE –
Before investing, an NRI is required to set up an account because Indian mutual funds can't accept investments in foreign currency.
Investing Methods
UAE-based NRIs need to -
The redemption of mutual fund investments varies across fund houses in India. After following the specific redemption process of the fund house, the AMC will deduct taxes and credit the remaining amount to the NRI's NRE or NRO account. Alternatively, they might issue a cheque for the amount.
Taxation for mutual funds in India is consistent — whether you're an Indian resident or an NRI. If you were investing in mutual funds and paying taxes on the gains when you lived in India, the same rules apply after you move to the UAE and continue investing.
Here's a simple breakdown for those unfamiliar with the tax structure -
Type of Fund | Investment Duration | Tax Rate |
---|---|---|
Equity Mutual Funds | Up to 1 year (Short Term) | 15% |
Over 1 year (Long Term) | 10% (Only if gains exceed Rs 1 lakh annually) | |
Balanced Mutual Funds | Short Term | 15% |
Long Term | 10% (without indexation) | |
Non-Equity (Debt) Schemes | Short Term | As per individual tax slab |
Long Term | 20% (with indexation) |
Note: Surcharges will be added to the mentioned tax rates.
Here's a simple breakdown of how mutual funds work, especially if you're an Indian citizen residing in the UAE -
Tabled below are the best Indian mutual funds along with their key aspects -
Mutual Fund | Category | Net Assets (Cr.) as of 31 August, 2023 | Expense Ratio | Exit Load | Compound Annual Growth Rate (5 Years) |
---|---|---|---|---|---|
ICICI Prudential Infrastructure Fund | Equity – Sectoral | INR 2,986 | 2.22 | 0-1 Year (1%), 1 Year and above (NIL) | 22.4% |
HDFC Infrastructure Fund | Equity – Sectoral | INR 856 | 2.56 | 0-1 Year (1%), 1 Year and above(NIL) | 16.9% |
Nippon India Small Cap Fund | Equity – Small Cap | INR 36,540 | 1.82 | 0-1 Year (1%), 1 Year and above (NIL) | 26.2% |
L&T Emerging Businesses Fund | Equity – Small Cap | INR 11,549 | 1.84 | 0-1 Year (1%), 1 Year and above (NIL) | 21.2% |
DSP BlackRock India T.I.G.E.R Fund | Equity – Sectoral | INR 2,471 | 2.24 | 0-1 Year (1%), 1 Year and above (NIL) | 21.3% |
IDFC Infrastructure Fund | Equity – Sectoral | INR 768 | 2.44 | 0-1 Year (1%), 1 Year and above (NIL) | 18.3% |
BOI AXA Credit Risk Fund | Debt – Credit Risk | INR 153 | 1.55 | 0-12 Months (4%), 12-24 Months (3%), 24-36 Months (2%), 36 Months and above (NIL) | -3.1% |
HDFC Small Cap Fund | Equity – Small Cap | INR 22,560 | 1.82 | 0-1 Year (1%), 1 Year and above (NIL) | 21.1% |
Franklin Build India Fund | Equity – Sectoral | INR 1,507 | 2.29 | 0-1 Year (1%), 1 Year and above (NIL) | 20.7% |
Nippon India Power and Infra Fund | Equity – Sectoral | INR 2,545 | 2.23 | 0-1 Year (1%), 1 Year and above (NIL) | 21.4% |
Before investing, you should consider some factors to ensure that your investments align with your goals and risk tolerance.
Here are the key factors to keep in mind -
For instance, are you investing for retirement, to buy a house, or for your child's education?
Depending on your goal, you can choose a mutual fund that aligns with your time horizon and risk appetite.
Assess how comfortable you are with market fluctuations and choose funds that match your risk profile.
If you are investing in Indian mutual funds, you should need a blend of knowledge, strategic planning, and careful consideration of multiple factors. This comprehensive guide has elaborated on how to invest in Indian mutual funds from UAE, taking into account the essential procedures, taxation implications, and critical factors to ensure a good investment experience.
By understanding and adhering to the guidelines set by relevant Indian authorities and being vigilant about tax implications, NRIs can benefit from the diverse investment opportunities offered by the Indian mutual fund sector and make informed choices.