In this note, we highlight the inconveniences faced by NRIs and also suggest how best to overcome them.

Beware of profit/commission driven advice
A lot of the advice that is offered to investors, including NRIs, is driven by commissions. A significant majority of investment consultants recommend schemes which offer them higher commissions as against schemes that suit the client’s needs and objectives. While in a bull market you may not get hurt by getting invested in poorly managed schemes; over a stock market cycle you can almost be sure that the poor choice of funds will reflect in the returns.

Sometimes, distributors of mutual funds either lack accurate information on taxation or do not pass on the correct information to their NRI clients. To take a case in point, if an NRI decides to shift within a particular mutual fund scheme, from say, the dividend re-investment option to the growth option, then the same falls under the tax purview for the NRI. This is because such transactions are considered as a sale by the concerned authorities.

Cumbersome paperwork/documentation
Another issue pertaining to NRIs is the cumbersome paperwork and documentation. For instance, while mutual fund forms are common for both resident Indians as well as for NRIs, refilling them on account of errors made can become a cumbersome proposition in the case of NRIs on account of the distances involved.

The distributor needs to ensure that his NRI client is guided properly through the form-filling process and that the form is error-free. Failure to follow simple guidelines may sometimes result in money and opportunities being lost. On their part, NRIs should exercise greater caution while filing forms and ensure that any overwriting/modifications/cancellations are authenticated.

Another case in point pertaining to documentation - our experience tells us that sometimes, the account statements do not reach the NRI. One way of tackling this problem is asking for the account statement via E-mail. That way, the need for physical delivery would be eliminated.

Incorrect/incomplete information on country-specific guidelines
Many NRIs are not informed by their distributors about some country-specific guidelines for the purpose of making investments. For example, the SEC guidelines prohibit Indian funds not registered in the US from mobilising monies from US based NRIs. Mutual funds in India (not registered in the US), whose parent companies are registered in the US (and therefore governed by the SEC), do not accept monies from US based NRIs.

Also observed is the fact that some NRIs are not ‘in the know’ with respect to how to go about making payments from their NRE/NRO bank accounts. For example, if the NRI makes payments from his NRO account, then repatriation is not allowed. But if the same payments are made from the NRE account, then the investment is allowed to be repatriated. This fact has to be conveyed to the NRI by the distributor so that the NRI is able to plan his investments properly.

Unnecessary duplication of efforts
At times, fund houses ask for a certificate authenticating the NRI’s status; the same has to be procured from the bank through which the NRI has invested his money. This is so even when the NRE/NRO account cheques have a clear mention on the cheque itself of the status of the cheque (i.e. the cheque being an NRE/NRO account cheque). We feel that the very mention of the cheque being an NRE/NRO account cheque should act as sufficient proof of the individual’s or the account’s status and that the NRI should not be put through any further hassles before investing. NRIs on their part can stay prepared for such situations by arming themselves with necessary documentation.

Having come this far in our note, one may be wondering as to how NRIs can overcome all the obstacles mentioned above. Given below are some guidelines, which NRIs can follow to ensure that they have a trouble free investment experience.

Select the investment advisor/consultant carefully
The first and foremost thing for NRIs to do is to ensure that they choose their investment advisor/distributor wisely. NRIs must ensure that the advisor they transact with has successfully cleared the Association of Mutual Funds of India (AMFI) accredited examination. Make sure that he has sound knowledge of the financial markets and instruments and manages portfolios soundly keeping the investor’s asset allocation in mind. This becomes an important criterion, as NRIs, like most investors, do not have the time or skill sets to conduct their own investment exercise.

It would further help if the investment consultant gives value added services like tools and calculators for online tracking of investments. Also, the advisor should provide the NRIs with timely after sales support like servicing transfers and redemptions.

Also ensure that the advisor is updated on the various procedures/requirements while investing in various instruments, as he will ultimately act as an interface between the NRI and the financial institution.

Ensure that the documentation is in order
Ensure that all the documentation is in order. NRIs should preserve all the statements of accounts and such other documents that concern their investments. Such documents should also be photocopied. Ensuring that all cheques have NRE/NRO printed on them also helps.

Look at country-specific guidelines if any
NRIs should confirm before investing money into a scheme from any mutual fund house whether they are allowed to invest into the scheme, given their country of residence. Such details are given in the offer document distributed by the asset management company (AMC) and a copy of which the distributor also has. For example, NRIs residing in USA cannot invest in schemes from Fidelity Mutual Fund, DSP Merrill Lynch Mutual Fund or Franklin Templeton Mutual Fund in India.

Consider some NRI-friendly options
NRIs should preferably consider the ‘direct credit’ option while investing into a mutual fund scheme in India. Such an option ensures that when redemption happens, money from the AMC is directly credited to the NRI’s bank account. This helps save time and money. Otherwise, if the cheque were to be couriered to the NRI, then the whole process of couriering, depositing and the bank crediting the NRI’s account would take around two to three weeks.

Many NRIs do not have a PAN (Permanent Account Number). While it is not always necessary that an NRI has to furnish his PAN, it is always advisable to obtain this number and furnish it wherever necessary. This will help NRIs in quoting the number for the purpose of claiming refunds on TDS among others.

All in all, having understood the various difficulties that NRIs may have to endure, it is not really difficult to fathom the correct way of going about investing in India. Ensuring that all the guidelines given above are diligently followed will certainly help. But at the same time, NRIs should also ensure that they themselves are involved as much as possible during critical junctions like while selecting the investment advisors. This will go a long way in ensuring NRIs a hassle free and a bright ‘India investment story’.

Money Simplified: The smart way to plan your finances Get your copy now! Click here to download!

More from NRI Corner:
- Indian Stock Markets and NRIs: a love-hate relationship
- Building a stock portfolio
- Strategy for equity-oriented mutual funds
- Strategy for debt-oriented funds
- Gift a monthly income
- Real Estate Investment Opportunities
- NRIs and life Insurance
- The PMS option
- Problems faced by NRIs while investing in India


The columns, articles, message board posts and any other features provided on Yahoo! Finance are provided for personal finance and investment information and are not to be construed as investment advice. Under no circumstances does the information in this content represent a recommendation to buy, sell or hold any security. The views and opinions expressed in an article or column are the author's own and not necessarily those of Yahoo! and there is no implied endorsement by Yahoo! of any advice or trading strategy.