Mutual Fund Investments for NRIs

Mutual funds are one of the most flexible and professionally managed investment options available to Non-Resident Indians (NRIs). They offer a diversified approach to wealth creation, whether you’re seeking long-term capital growth or stable income through regular investments.

With a growing number of asset management companies (AMCs) in India offering dedicated NRI services, investing in mutual funds has become increasingly accessible from across the globe.

Top Mutual Fund Options for NRIs

NRIs can invest in a wide range of mutual fund categories based on their investment objectives, time horizon, and risk appetite. Common categories include:

• Equity Mutual Funds – Ideal for long-term capital growth. Examples: Large-cap, mid-cap, multi-cap funds.

• Debt Mutual Funds – Suitable for conservative investors. Examples: Liquid funds, corporate bond funds.

• Hybrid Funds – Balanced exposure to both equity and debt.

• Index Funds/ETFs – Passive investment options with low costs and broad market exposure.

Investors can choose between:

• Systematic Investment Plans (SIPs): Small, regular contributions to build wealth gradually.

• Lump Sum Investments: One-time investments for those with idle capital or targeted financial goals.

Investment Process: How NRIs Can Invest

Account Requirements

NRIs can invest in Indian mutual funds using either:

• NRE (Non-Resident External) Account: Repatriable, both principal and returns.

• NRO (Non-Resident Ordinary) Account: Non-repatriable beyond certain limits.

• FCNR (Foreign Currency Non-Resident) Account: Generally not used directly but can route funds.

You shall also need:

• KYC Compliance: Includes PAN card, overseas address proof, passport copy, and recent photograph.

• FATCA Declaration: Mandatory for NRIs, especially from the U.S. and Canada.

• Power of Attorney (PoA): Optional, for smoother operation if you’re investing offline or via a representative.

Modes of Investment

• Online Platforms: Most AMCs and third-party fintech platforms offer NRI-specific portals.

• Through Banks or Advisors: Especially if you’re using NRO/NRE accounts linked to Indian banks.

• Via PoA or Distributors: For assisted or offline investments.

Taxation on Mutual Fund Investments for NRIs

Capital Gains Tax

• Equity Funds:

  • Short-term (<12 months): 15%

  • Long-term (≥12 months): 10% on gains above ₹1 lakh/year

• Debt Funds:

  • Short-term (<36 months): Taxed as per income slab

  • Long-term (≥36 months): 20% with indexation

TDS (Tax Deducted at Source)

• TDS is applicable at source for NRIs:

  • Equity Funds: 15% (short-term), 10% (long-term)

  • Debt Funds: 30% (short-term), 20% (long-term)

• TDS applies even if total income is below the basic exemption limit.

DTAA (Double Taxation Avoidance Agreement) Benefits

India has DTAA agreements with several countries. If you’re a tax resident of one of these, you may:

• Claim credit for taxes paid in India

• Avoid being taxed twice on the same income

You’ll need to submit a Tax Residency Certificate (TRC) and relevant documentation to your AMC or bank.

Repatriation of Funds

• From NRE Account: Both capital and returns are freely repatriable.

• From NRO Account: Up to USD 1 million per financial year can be repatriated, subject to documentation and tax clearance.

Tracking and Managing Investments from Abroad

• Online Dashboards & Mobile Apps offered by AMCs and distributors allow seamless tracking.

• Consolidated Account Statements (CAS): Sent monthly, covering all mutual fund holdings.

• NRIs can nominate beneficiaries and appoint a Power of Attorney (PoA) to manage investments in their absence.

Important Notes

• NRIs from the U.S. and Canada may face restrictions due to FATCA regulations. Only select AMCs (like ICICI, L&T, and UTI) accept investments from these regions.

• Always verify with the AMC or distributor regarding eligibility and compliance before investing.

Conclusion

Mutual funds offer NRIs a compelling opportunity to participate in India’s economic growth while benefiting from professional fund management and diversification. By choosing the right funds, understanding taxation, and ensuring compliance with Indian and international regulations, NRIs can build a strong, long-term investment portfolio from anywhere in the world.

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