NRI nominee for financial assets? Check your money transfer limit, required documents and more

New Delhi: For an Indian investor, the decision to appoint a non-resident Indian (NRI) relative as a nominee for financial assets such as mutual funds, bank accounts, shares and others can be confusing. Whether it is allowed or not, what is the procedure and what documents are required are some questions that may come to mind.

It is important to understand the difference between a nominee and an heir to these assets. Nominee ownership does not automatically make a person the legal heir to financial assets upon the owner’s death. The nominee acts as the custodian until the assets are transferred to the actual heir.

According to the Association of Mutual Funds of India (AMFI), an NRI can be called the nominee of an investor’s financial assets. Similarly, Section 45ZA of the Banking Regulation Act, 1949, Section 72 of the Companies Act, 2013 and the SEBI (Depositories and Members) Rules do not prohibit the appointment of NRIs.

However, this process may require additional documentation, KYC requirements and compliance with currency regulations, depending on the type of asset.

The nominee receives the financial assets of the deceased and distributes them to the legal heirs or may hold them until a legal heir is identified. Ownership does not automatically pass to the nominee.

If the nominee is also the legal heir to the assets, he can repatriate the inherited assets abroad in accordance with the rules of the Foreign Exchange Management Act (FEMA). Remittances of inherited investments by NRIs are limited to US$1 million per financial year through an NRO account and an authorized dealer’s Category I bank. Banks typically require the investor’s death certificate, inheritance documents, PAN documents, KYC and tax compliance documents, among others, as per FEMA requirements.

Please note that repatriation beyond the specified limit is still possible with RBI approval.

Depending on whether the remittance is taxable and the amount and nature of the transaction, a person may be required to file Form 15CA, including Part D for non-taxable remittances, Form 15CB or a certificate from the Assessing Officer, if required.

Although a nominee is designated at the initial stage of investments, including mutual funds and stocks, in some cases, an investor can opt out of being designated as a nominee by filing a declaration.

Nominating someone once does not obligate the investor to retain the same candidate throughout the term. Subsequently, the mutual fund candidate can be updated by applying through the investment platform. Similarly, for shares, an investor can log into the stock broker’s portal and fill the nomination details online.