SIP for NRI

Mutual Funds have been a popular choice for NRIs as a means of investing in India. Many people might not know but investing in a Systematic Investment Plan (SIP) will be beneficial. This article will act as a comprehensive guide for individuals looking forward to purchasing some SIPs in India and who want to get a brief account of the procedure.

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What is SIP?

SIP allows individuals to invest a small fixed amount regularly in their desired or selected mutual funds. A fixed amount will be deducted every month from the investor's bank account and invested in their preferred mutual fund to activate a SIP. 

By availing of the benefits of SIP, an investor does not need to invest a huge lump sum at one go; instead, his investments are segmented into small amounts that are paid monthly. The Systematic Investment Plan also instils a sense of financial discipline in the investor to set their money aside for regular interval payments.

Top SIP Mutual Funds in India

Here are best mutual fund schemes to invest through SIP in India

SIP Plans Type 3 Year 5 Year
Aditya Birla Sun Life Medium Term Plan Debt Fund 8.39% 9.13%
Aditya Birla Sun Life Savings Fund Debt Fund 7.53% 8.03%
Aditya Birla Sun Life Short Term Fund Debt Fund 7.83% 8.37%
Axis Blue Chip Fund Equity Fund 7.53% 5.92%
Axis Focused 25 Fund Equity Fund -9.74% 7.66%
Birla SL Balanced '95 Fund Balanced Fund 9.42% 16.83%
Birla SL Equity Fund Equity Fund 13.70% 21.78%
DSP BlackRock Midcap Fund Equity Fund 16.77% 25.68%
DSP Equity Fund Equity Fund -9.97% 3.25%
DSP Strategic Bond Fund Debt Fund 7.70% 8.10%
Edelweiss Large &Mid-cap Fund Equity Fund 1.70% 2.90%
HDFC Balanced Balanced Fund 10.65% 18.96%
HDFC Mid Cap Opportunities Fund Equity Fund 14.84% 26.00%
HDFC Prudence Fund(G) Balanced Fund 9.02% 16.56%
HDFC Small Cap Fund Equity Fund 21.52% 24.31%
ICICI Prudential Balanced Advantage Fund Balanced Fund 9.16% 14.39%
ICICI Prudential Equity & Debt Fund Equity Fund 11.11% 17.48%
ICICI Prudential Value Discovery Equity Fund 7.34% 21.25%
Kotak Standard Multicap Fund Equity Fund -1.28% 3.56%
L&T India Prudence Fund Balanced Fund 10.03% 18.36%
L&T low Duration Fund Debt Fund 6.12% 7.49%
Mirae Emerging Bluechip Fun Equity Fund 1.80% 8.10%
Motilal Oswal Focused 25 Fund Equity Fund -8.25% 3.69%
Nippon India Low Duration Fund Debt Fund 7.50% 7.73
Reliance Credit Risk Fund Debt Fund 7.87% 8.33%
Reliance Liquid-Treasury Plan(G) Debt Fund 6.82% 7.32%
SBI Bluechip Fund Equity Fund -3.94% 0.95%
SBI Magnum Balanced Fund Balanced Fund 9.10% 17.27%
SBI Magnum Gilt Short Term Debt Fund 8.78% 9.38%
SBI Small Cap Fund Equity Fund 1.80% 8.40%
TATA Large &Mid-cap Fund Equity Fund -2.45% 1.00%
See More Plans

Disclaimer: Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer. Tax benefit is subject to changes in tax laws. *Standard T&C Apply

What are the Benefits of SIP?

India attracts several foreign investors because of its emerging and potentiality of enhancing the economy. These investors are a vital section and play an essential role in the Indian economy. 

Investment Plans for NRIsInvestment Plans for NRIs

The following are some of the benefits that NRIs can avail themselves of from investing in mutual fund schemes through SIP:

  1. Flexibility

    SIP is one of the most convenient ways for investing in mutual fund schemes as it offers flexible payments at regular intervals and flexibility during inconsistent market trends.

  2. Higher Returns

    Systematic Investment Plans (SIPs) can be seen as an efficient and reliable way of getting higher returns during inflation than FDs or RDs.

  3. Compounding Power

    SIPs will help the investors augment their returns over the long-term course.

  4. Easier Management

    With a huge lump sum of investment, it becomes tedious for the investors to manage their funds and their large number of units. With SIP schemes, purchasing units at regular intervals makes it effortless to track and manage the funds.

  5. Profits from Rupee Appreciation

    If the value of the Indian rupee increases from the investor's resident currency, then the chance of gaining profit becomes higher.

Investment Plans for NRIsInvestment Plans for NRIs

How Does SIP Work?

SIP invests a fixed amount, regularly in a mutual fund scheme. Investors can buy the fund units on a date chosen by them. They can invest a pre-determined fixed amount every month or quarter, depending on their selection.

Every time a SIP investor invests in mutual funds through SIP, the individual buys a specific number of units according to the investment made by the individual. This does not require time market analysis as an investor investing through SIP will benefit from bullish and bearish trends.

Are NRIs Eligible for Investing in Mutual Funds SIPs in India?

Non-Residents of India (NRI), Persons of Indian Origin (PIO), and Overseas Citizens of India (OCI) are eligible for investing in Indian mutual fund SIP schemes just like the Indian residents. On top of this, no special permission is required from RBI or any other banking body to invest in the mutual fund SIP schemes.

What are NRI SIPs?

SIPs are user-friendly and straightforward plans to invest in for Indian citizens. However, when it comes to an NRI, many individuals get confused with the protocols and norms of a SIP. 

There are two options available in the market for NRIs who want to invest in Indian mutual funds schemes through SPIs. Those options are the repatriable and non-repatriable basis.

For a repatriable basis, an NRI must own an NRE account or an FCNR account in an Indian bank.

For non-repatriable assets, an NRI must hold either an NRE account or an NRO account with an Indian banker.

How Can the NRIs Invest in SIP?

There are two primary tools that an NRI requires for proceeding with any investment in India:

  • Non-Resident Original Account (NRO)
  • Non-Resident External Account (NRE)

NRIs can easily invest in Indian mutual funds with the help of bank accounts, as mentioned earlier in any Indian bank. So now we need to get an inclusive insight into the process of investment through SIPs.

Before investing in an Indian mutual fund scheme, investors must register themselves with RTA (Registered Transfer Agents). These RTAs are responsible for maintaining a detailed record of Mutual Funds Investors. In the market, there are several digital platforms and wealth management companies that help the NRIs with the registration and handling of KYC documents for an effortless investment experience. The most rated RTAs in India for mutual fund investments are Computer Age Management Services (CAMS) and Karvy.

  1. Online KYC

    This involves a seamless process through, which NRIs can effortlessly complete their KYC (Know Your Customer) requirements for Indian Mutual Funds Schemes. This process involves the NRIs submitting the required documents through the online method, and the system verifies the details through IPV (In-Person Verification).

  2. Documents Required

    The following are some of the documents required to proceed with the registration process:

    • Filled in and signed KYC form.
    • Passport and PAN Card (self-attested) for identity verification.
    • Mandatory address proof for the verification of NRIs (both correspondence and overseas address).
  3. In-Person Verification Process

    After submitting the relevant documents, the verification of the documents is an essential step of the procedure.

    Several authorized entities do the In-Person Verification to check the authenticity of the documents presented by the investors. This IPV can be done in two methods:

    1. Offline Method

      This method includes document verification where NRIs are required to visit the nearest office, or some officials visit the NRIs' workplace or home for originality verification. 

    2. Online Method

      This is the most prevalent method of document verification in recent digital existences. The IPV can be done on a video call with the authorized agencies and entities. The video call includes the officials asking questions about the details given in the KYC form. If the officials suspect any foul play or any details are contradicted, the application can get cancelled.

SIP Investment for NRIsSIP Investment for NRIs

How are NRI Investors Taxed?

A common fear of paying double taxes is prevalent among the NRI investors of Indian mutual fund schemes. However, the lack of insight makes the investors fear double taxes. This is certainly not the case because if India has signed the DTAA (Double Taxation Avoidance Agreement) with the investor's country, there will be no paying taxes twice.

The following table mentions the tax rates on capital gains of mutual funds:

Type of Funds

Short Term Capital Gains          (STCG) Tax

Long Term Capital Gains (LTCG) Tax

Equity-oriented mutual funds

15%

10% without Indexation

Balanced Mutual Funds

15%

10% without Indexation

Debt-oriented Mutual Funds

As per tax slab

20% after Indexation

Note: Tax benefit is subject to changes in tax laws. Standard T&C apply.”

Investment Plans for NRIsInvestment Plans for NRIs

Important Points for NRI Investors

There are some aspects of investing in Indian MFs that must be kept in mind by NRIs. These points can be seen as limitations or protocols of Mutual Funds Investment. The following are the points that every NRI should consider before investing in an Indian mutual fund:

  • If foreign bank account details are provided as the investment tool, then the application of any NRI will be cancelled.
  • The tax will be deducted at source on the capital gains during the retrieval of mutual fund units.
  • Until an individual remains NRI, they have the full right to mutual fund investments transferability. They can repatriate the amount invested and the amount earned from the MF schemes.
  • The guidelines for compliance requirements are stricter in the USA and Canada than in other nations. For example, according to FATCA norms, transactions of every individual must be shared by the financial institutions; it also involves US residents working for the US government.
  • Before investing in Indian Mutual Fund schemes, individuals must check whether they are residents of the ninety countries that signed the CRS (Common Reporting Standard).

Wrapping it Up

The initial stages may get tedious for an individual; however, the returns earned on mutual fund investing will be beneficial compared to the hassles taken. Make sure to do the research thoroughly in regards to the SIP investments for an NRI.

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