Ella Walter
To register for a mutual fund in India, investors must complete a background check, also known as Know Your Customer (KYC) norms. This can be done online or offline, with the online route involving the use of the Know Your Client Registration Agency (KRA) portal. Investors must link their Aadhaar and PAN to buy or sell units in a mutual fund. Non-resident investors without an Aadhaar card can provide a copy of their passport, Person of Indian Origin (PIO) Card, Overseas Citizenship of India (OCI) Card, and overseas address proof.
| Characteristics | Values |
|---|---|
| Online registration | Investors can complete their Know Your Client (KYC) registration online or offline |
| Required documents | Aadhaar card, PAN card, passport, driving license, voter ID, PIO card, OCI card, proof of overseas address |
| Status | 'Validated', 'registered', and 'on hold' |
| Redemption rules | Investors with 'on hold' status cannot buy or sell units but can redeem their existing investments |
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What You'll Learn
Linking PAN and Aadhaar
For new applicants of the PAN card, the Aadhaar-PAN linking is done automatically during the application stage. However, for existing PAN holders, who were allotted PAN on or before 1 July 2017, it is imperative to link PAN with Aadhaar by 30 June 2023. Failure to do so will result in the PAN becoming "inoperative," leading to various restrictions and consequences, such as higher TDS/TCS deductions, inability to open a Demat account, and restrictions on specific investments and transactions.
To link your PAN with Aadhaar, you can follow these general steps:
- Visit the official e-Filing Portal of the Income Tax Department.
- Log in to the portal using your credentials.
- On the Dashboard, look for the "Link Aadhaar to PAN" option under the "Profile" section, and click on "Link Aadhaar." Alternatively, you can find the "Link Aadhaar" option under the "Quick Links" section on the homepage.
- Enter your PAN and Aadhaar number, and click on "Validate."
- Provide any additional mandatory details, such as your name and date of birth, as mentioned on your Aadhaar card.
- You may be asked to enter an OTP sent to your registered mobile number for verification.
- After successful validation, a message will be displayed, confirming the status of your Aadhaar-PAN link.
Please note that there might be slight variations in the steps depending on the portal and your specific circumstances. Additionally, linking PAN with Aadhaar is not applicable to individuals residing in the states of Assam, Jammu and Kashmir, and Meghalaya, who do not possess an Aadhaar number or Enrollment ID.
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Online and offline KYC routes
Investors can complete their Know Your Customer (KYC) procedures for mutual funds online or offline. The status of the investor's KYC is categorised as 'validated', 'registered', or 'on hold'.
Online KYC Route
Those who have completed their KYC validation via Aadhaar card (either Digilocker or Aadhaar card with a QR code) are considered 'validated'. This status allows investors to invest with any fund house without any issues related to mutual fund transactions.
To achieve 'validated' status, investors who have completed their KYC using a driving licence, voter ID, or passport are now requested to redo their KYC using an Aadhaar card.
Offline KYC Route
Those who have completed their KYC using a driving licence, voter ID, or passport are considered 'registered'. This status allows investors to buy or sell units from their existing mutual funds but they are not permitted to invest in any other mutual fund.
Non-resident investors without an Aadhaar card are also considered 'registered'. They can invest in fund houses other than the ones they are currently invested in. For these investors, a copy of their passport, Person of Indian Origin (PIO) Card, Overseas Citizenship of India (OCI) Card, and overseas address proof are required. They are exempt from linking their PAN and Aadhaar card by updating their residential status as Non-Resident on the Income Tax portal.
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'Validated' status
The Permanent Account Number (PAN) is a unique identifier assigned to all financial taxpayers in India. It is necessary to link your PAN with your Aadhaar card to carry out financial transactions.
The 'Validate' status is part of the process of verifying your PAN. This process is available on the e-Filing portal for all users without having to log in. To verify whether your PAN is valid for financial transactions, you must check the PAN card active status on the Income Tax e-filing portal.
To do this, you must first click on the 'Verify PAN Status' option under the 'Quick Links' heading on the homepage. Then, enter your PAN number, name, date of birth, and mobile number and click 'Continue'. You will receive an OTP on your mobile number, which you must enter on the portal, followed by clicking the 'Validate' button. On successful validation, your PAN status will be displayed.
Your PAN card may be marked as inoperative or deactivated by the Income Tax Department for several reasons. This includes failure to link your PAN with your Aadhaar card, holding more than one PAN card, discrepancies between PAN and Aadhaar details, and more.
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'Registered' status
Investors with 'registered' status have completed their Know Your Client (KYC) checks, but have not been 'validated'. This means that they can only invest in or redeem from their existing mutual funds, and are not allowed to invest in any other mutual funds. Investors with this status have likely completed their KYC using a driving licence, voter ID, or passport.
To achieve 'validated' status, investors are requested to redo their KYC with an Aadhaar card. This can be done online or offline. The Aadhaar card can be uploaded from Digilocker or as a card with a QR code.
If an investor does not have an Aadhaar card, they can still achieve 'validated' status by linking their PAN card with their Aadhaar card and completing their KYC using the Aadhaar card. This can be done by submitting a self-attested copy of their PAN card, mentioning their folio number from their registered email ID to their mutual fund provider.
For non-resident investors, a copy of their passport, Person of Indian Origin (PIO) Card, Overseas Citizenship of India (OCI) Card, and overseas address proof are required. Non-resident investors without an Aadhaar card are exempt from linking their PAN card to their Aadhaar card if they update their residential status as a non-resident on the Income Tax portal.
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Exemptions for NRIs
A PAN card is essential for NRIs who want to invest in mutual funds in India. It serves as a crucial form of identification and enables NRIs to participate in India's economic life, particularly when investing in stocks or mutual funds. However, it's important to note that NRIs from the United States and Canada may encounter restrictions with certain AMCs when investing in Indian mutual funds due to FATCA/CRS compliance issues.
NRIs can choose to obtain either a physical PAN card or an e-PAN, which is a digitally signed version sent via email and holds equal validity. The process for acquiring a PAN card as an NRI typically involves the following steps:
- Complete the Account Opening Application Form: This form must be signed by the NRI mutual fund applicants.
- Provide a PAN card copy: The PAN card copy must be attested by the Indian embassy or consulate.
- Submit documents: Along with the acknowledgment, submit the original documents or their attested copies to the chosen agency within 15 days. The documents must be addressed with "APPLICATION FOR PAN - Acknowledgment Number".
- Await PAN card delivery: The PAN card will be dispatched to the designated address, with fees depending on the delivery location and type of PAN card chosen.
It is important to note that NRIs investing in mutual funds may have tax implications in both their resident country and India. Income earned from mutual fund investments by NRIs is subject to taxation in India, with tax rates similar to those for resident Indians. However, countries like the United States may have distinct taxation policies for foreign assets, including mutual funds. Consulting a tax expert is advisable to navigate these complexities.
Additionally, NRIs can continue their existing mutual fund SIPs initiated when they were resident Indians. However, updating NRO account details with the AMC or broker is mandatory once they become NRIs.
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Frequently asked questions
KYC stands for Know Your Client, and it refers to the background checks that investors must complete to invest in mutual funds. The KYC status of investors can be categorised as 'validated', 'registered', or 'on hold'.
To register your PAN for mutual funds, you must first complete your Know Your Client (KYC) registration. You can complete the KYC process online or offline. To complete it online, download the KYC form from the relevant website and submit the form with supporting documents to the nearest CAMS branch or your financial advisor. Alternatively, you can submit a self-attested copy of your PAN card, mentioning your folio number from your registered email address.
To complete your KYC registration, you will need to provide a copy of your Aadhaar card, driving license, voter ID, or passport. If you are a non-resident investor, you will need to provide a copy of your passport, Person of Indian Origin (PIO) Card, Overseas Citizenship of India (OCI) Card, and overseas address proof.
Once you have completed your KYC registration and updated your information on the Know Your Client Registration Agency (KRA) portal, your status will be shifted to validated. This means you will be able to buy or sell units in any mutual fund.
