10.5 Mutual Fund Investors: Who Can Invest

NISM-Series-V-A: Mutual Fund Distributors Certification Examination Exam

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1 Chapter 1: Introduction & Exam Overview

1.1 About the NISM-Series-V-A Examination 1.2 The 12-Unit Curriculum Map and a Study Plan

2 Chapter 2: Investment Landscape

2.1 Investors and Their Financial Goals 2.2 Savings or Investments? 2.3 Different Asset Classes 2.4 Investment Risks 2.5 Risk Measures and Management Strategies 2.6 Behavioural Biases in Investment Decision Making 2.7 Risk Profiling 2.8 Asset Allocation and Do-It-Yourself versus Professional Help

3 Chapter 3: Concept and Role of a Mutual Fund

3.1 Concept of a Mutual Fund 3.2 Classification of Mutual Funds 3.3 Growth of the Mutual Fund Industry in India

4 Chapter 4: Legal Structure of Mutual Funds in India

4.1 Structure of Mutual Funds in India 4.2 Key Constituents of a Mutual Fund 4.3 AMC Organisation Structure and Service Providers 4.4 Role and Function of AMFI

5 Chapter 5: Legal and Regulatory Framework

5.1 Role of Regulators in India 5.2 Role of SEBI and the Mutual Fund Regulations 5.3 Due Diligence Process by AMCs for Distributors 5.4 Investor Grievance Redress Mechanism 5.5 AMFI Code of Conduct for Intermediaries

6 Chapter 6: Scheme Related Information

6.1 Mandatory Documents I: Scheme Information Document and Statement of Additional Information 6.2 Mandatory Documents II: Key Information Memorandum and the Advertisement Code 6.3 Non-Mandatory Disclosures

7 Chapter 7: Fund Distribution and Channel Management Practices

7.1 The Role and Importance of Mutual Fund Distributors 7.2 Different Kinds of Mutual Fund Distributors 7.3 Modes of Distribution 7.4 Pre-requisites to Become a Distributor of a Mutual Fund 7.5 Revenue for a Mutual Fund Distributor 7.6 Commission Disclosure Mandated by SEBI 7.7 Distributors versus Investment Advisers, Nomination Facilities and Change of Distributor

8 Chapter 8: Net Asset Value, Total Expense Ratio and Pricing of Units

8.1 Fair Valuation Principles 8.2 Computation of Net Assets of a Scheme and NAV 8.3 Dividends and Distributable Reserves 8.4 Entry and Exit Load and Its Impact on NAV 8.5 The Expense Ratio Framework: Base Expense Ratio, Brokerage and Statutory Levies 8.6 Key Accounting and Reporting Requirements 8.7 NAV, Total Expense Ratio and Pricing of Units for the Segregated Portfolio

9 Chapter 9: Taxation

9.1 Applicability of Taxes in Respect of Mutual Funds 9.2 Capital Gains on Mutual Fund Units 9.3 Dividend (IDCW) Income and Tax Deducted at Source 9.4 Stamp Duty and Securities Transaction Tax on Mutual Fund Units 9.5 Setting Off Capital Gains and Losses under the Income Tax Act 9.6 Tax Benefit under Section 80C and Applicability of GST

10 Chapter 10: Investor Services

10.1 The New Fund Offer Process 10.2 New Fund Offer Price and Ongoing Offer Price for Subscription 10.3 Investment Plans and Services 10.4 Allotment of Units and Account Statements 10.5 Mutual Fund Investors: Who Can Invest 10.6 Filling the Application Form for Mutual Funds 10.7 Financial Transactions with Mutual Funds 10.8 Cut-Off Time and Time Stamping 10.9 KYC Requirements for Mutual Fund Investors 10.10 Systematic Transactions and Their Operational Aspects 10.11 Non-Financial Transactions, Special Investor Categories and Turnaround Times

11 Chapter 11: Risk, Return and Performance of Funds

11.1 General and Specific Risk Factors 11.2 Factors That Affect Mutual Fund Performance 11.3 Drivers of Returns and Risk in a Scheme 11.4 Measures of Returns 11.5 SEBI Norms Regarding Representation of Returns 11.6 Risks in Fund Investing: The Investor's Perspective 11.7 Measures of Risk and Provisions Relating to Credit Risk

12 Chapter 12: Mutual Fund Scheme Performance

12.1 Benchmarks and Performance 12.2 Price Return Index or Total Return Index 12.3 Basis of Choosing an Appropriate Performance Benchmark 12.4 Benchmarks for Equity Schemes 12.5 Benchmarks for Debt Schemes and Other Schemes 12.6 Quantitative Measures of Fund Manager Performance 12.7 Tracking Error and Scheme Performance Disclosure

13 Chapter 13: Mutual Fund Scheme Selection

13.1 Scheme Selection Based on Investor Needs, Preference and Risk Profile 13.2 Risk Levels in Mutual Fund Schemes 13.3 Scheme Selection Based on Investment Strategy 13.4 Selecting a Scheme Across AMCs or Within a Scheme Category 13.5 Selecting Options in Mutual Fund Schemes and Do's and Don'ts

10.5 Mutual Fund Investors: Who Can Invest

Key Takeaways Explain This Topic AI

Resident individuals, HUFs, minors through a guardian, and a wide range of institutions may invest.

A minor's folio is held solely in the minor's name, operated by a natural or court-appointed guardian.

NRIs, PIOs and OCIs may invest on a repatriable or non-repatriable basis subject to FEMA.

Some AMCs restrict investors resident in the United States and Canada because of FATCA compliance costs.

Overseas Corporate Bodies are not permitted to invest in Indian mutual funds.

Last updated: August 2026

Eligible Investors

• Category Notes
• Resident individuals Singly or jointly, up to three holders
• Minors Through a natural or court-appointed guardian
• Hindu Undivided Family Through the Karta
• Non-resident Indians, PIOs, OCIs On repatriable or non-repatriable basis
• Companies, bodies corporate Board resolution and authorised signatories required
• Partnership firms and LLPs Partnership deed and authorisation
• Trusts, societies, charitable institutions Where permitted by their constitutive documents
• Banks, financial institutions, NBFCs Subject to their own regulator's norms
• Foreign Portfolio Investors Registered with SEBI
• Provident, gratuity, superannuation and pension funds Where their rules permit
• Army, navy and air force funds And similar institutional bodies
• Sole proprietorships In the proprietor's name
• Scientific and industrial research organisations Where permitted

Overseas Corporate Bodies (OCBs) are not permitted to invest in Indian mutual funds. This category was derecognised as an investor class and remains excluded — a reliable examination point.

Minors

The rules for minors are precise and generate frequent operational problems.

The folio is held solely in the minor's name . There can be no joint holder .

It is operated by a guardian — a natural guardian (father or mother) or a court-appointed guardian.

Proof of the minor's date of birth is mandatory : birth certificate, passport or school certificate.

Where the guardian is not a natural guardian, court appointment documentation is required.

Payment for investment must come from the minor's own account or the guardian's account ; third-party payment is not permitted.

On attaining majority

This is the single most examined transition. On the minor's eighteenth birthday:

• The folio is frozen for all transactions until documentation is completed
• Standing instructions such as SIP, STP and SWP cease automatically

The now-major investor must submit a fresh application with KYC , PAN, bank details in their own name and specimen signature attested as prescribed

The guardian's operating rights end ; the guardian cannot transact after the eighteenth birthday even if documentation is pending

AMCs write to the guardian in advance, but folios are still frozen routinely because the reminder was ignored. A distributor tracking minor folios and prompting the change a month ahead prevents an interrupted SIP and a frustrated client.

Non-Resident Investors

NRIs, Persons of Indian Origin and Overseas Citizens of India may invest, subject to FEMA .

• Basis Account used Repatriation of proceeds
• Repatriable NRE or FCNR account Permitted, subject to conditions
• Non-repatriable NRO account Restricted; proceeds credited to NRO

Operational points that matter in practice:

TDS applies to non-residents on both distributions and capital gains under section 195, so redemption proceeds arrive net of tax — unlike for residents.

DTAA relief may reduce the rate, but requires a Tax Residency Certificate and Form 10F .

FATCA and CRS declarations are mandatory, requiring disclosure of tax residency.

Several AMCs do not accept investments from persons resident in the United States or Canada , because of the compliance burden those jurisdictions impose. This is an AMC-level commercial decision , not a legal prohibition, so it varies between fund houses and a distributor should check rather than assume.

Institutional Investors

Non-individual investors require additional documentation at onboarding:

• Board resolution or authorisation identifying who may transact
• List of authorised signatories with specimen signatures
• Constitutive documents — memorandum and articles, partnership deed, trust deed, bye-laws
• Ultimate Beneficial Owner (UBO) declaration identifying the natural persons behind the entity
• FATCA and CRS declarations

The UBO requirement flows from anti-money-laundering obligations: the framework requires knowing the natural persons who ultimately control an entity, not merely the entity's name.

Joint Holding

Up to three holders may be recorded on a folio, with a stated mode of operation:

• Mode Who may transact
• Single or Anyone or Survivor Any one holder alone
• Joint All holders must sign every instruction

The first holder is the one whose PAN, tax position and bank account govern the folio — all tax consequences attach to the first holder regardless of who contributed the money.

A practical caution worth giving: choosing Joint mode means every redemption, every bank change and every nomination requires all signatures, which becomes difficult if a holder is abroad or unwell. Anyone or Survivor is operationally far easier and is the appropriate default for most families.

• Who Cannot Invest
• Overseas Corporate Bodies
• Persons in jurisdictions where the offering would be unlawful, as stated in the scheme documents
• Investors whose KYC is on hold or incomplete, until it is regularised
• Entities barred by SEBI or other regulators from accessing the securities market