What happens to Mutual Funds after an Indian investor's death if the nominees are US citizens?

What happens to your mutual fund investments if you pass away and your nominees live abroad? For many Indian investors with family members settled in the US, this is an important question, particularly when their spouse or children hold foreign citizenship and do not have an Indian bank account.

Can they claim the investments if they have an OCI card? Will they need to travel to India, open an Indian bank account or go through lengthy legal procedures?

Today's Q&A explains such details in response to a query by a reader.

The spouse and daughter can open an NRO account remotely from the US with any of major Indian banks (such as ICICI, HDFC, SBI, or Axis). For opening an NRO account the nominees will need to provide basic documents like US Passport, OCI Card, US Proof of Address, Indian PAN card (if available). They can apply for PAN if do not have one.

If the nominees wish they can redeem the investments once new folio is created with transmitted investments. Since spouse and daughter are non-resident for income tax purposes, the fund house will deduct tax at source on the profit element in the mutual fund redemption amount at rates depending on period of holding and nature of mutual fund schemes.

A non-resident is permitted to remit upto 10 lakh USD every year from India after submitting certificate from a chartered accountant to the remitting bank.