Compliance Requirements for NRI Investments in India
Compliance Requirements-
FATCA Implications: FATCA mandates that financial institutions report information about transactions involving US individuals, including NRIs, to the US government. This is aimed at preventing tax evasion by US citizens earning income abroad.
Inter-Governmental Agreement: In July 2015, India and the US entered into an Inter-Governmental Agreement (IGA) to enhance international tax compliance under FATCA. This led many mutual fund companies in India to stop accepting investments from US and Canadian NRIs.
Current Investment Restrictions-
Investment Modes: While some mutual fund companies have resumed accepting investments from US and Canadian NRIs, they often impose restrictions. For example, L&T Mutual Fund does not allow investments in close-ended funds, while others like ICICI Prudential and SBI Mutual Fund permit investments only through offline transactions, requiring additional signed declarations.
Self-Declaration Requirement: Financial institutions must obtain self-declarations from investors regarding their nationality and tax residency status to comply with FATCA. This process involves additional compliance and reporting, which can complicate the investment process for US and Canadian NRIs.
Regulatory Oversight-
RBI and SEBI Regulations: The Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) also impose certain restrictions on investments by NRIs, adding another layer of compliance that must be navigated.
Also Read: Why Should NRI opt for obtaining insurance policy in india?