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Why do US, Canada NRIs face these restrictions on mutual fund investments in India? | Jobs Vox

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Are you a Non-Resident Indian (NRI) in India? The process of mutual fund investments (non-USA and Canada) is as easy for NRIs as it is for residents in India. You should invest through a non-resident non-resident (NRE) or non-resident ordinary (NRO) account of any bank in India.

Commenting on why US and Canadian NRIs face certain restrictions while investing in mutual funds in India, Amit Gupta, MD, SAG Infotech said, “This is due to strict compliance requirements under the Foreign Account Tax Compliance Act (FATCA).

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

After consultation with fund companies and specialists, many of these countries continue to invest but there are some restrictions.

For example, while L&T Mutual Fund does not allow investments in recently settled funds, ICICI Prudential AMC, Birla Sun Life Mutual Fund, and SBI Mutual Fund allow the same only through offline transaction mode with an additional statement signed by the customer,” said Gupta.

“Any financial institutions must provide information to the US government about all transactions involving US individuals, including NRIs. FATCA will ensure that there is no willful tax evasion on the income of US citizens abroad,” said Manoj Kumar Dalmiya, Founder & Director, Proficient Equities Private Limited.

Arkht Gupta, Founder and CEO, Clear also said that restrictions due to FATCA apply to US residents, “Compliance with FATCA requires certain entities to self-disclose from investors about their citizenship and residency status for tax purposes. This is to determine whether or not they are a US tax resident and whether or not they are subject. Such information may be exchanged between tax authorities to ensure compliance. This will require financial institutions to undertake more compliance and reporting so that NRIs from the US can take additional steps before investing in India, said Archd Gupta.

In addition, RBI and SEBI impose certain restrictions on investments by NRIs in India, he added.

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