Can NRI Buy Mutual Funds in India? Rules, KYC, NRE/NRO, Tax & Repatriation (2025 Guide)

TL;DR

• Yes-NRIs can buy Indian mutual funds under FEMA, with SEBI/RBI rules and KYC + FATCA/CRS compliance.
• Fund using NRE/FCNR (repatriable) or NRO (usually non-repatriable) accounts; credit goes back to the same type.
• US/Canada residents face AMC-specific acceptance; onboarding is possible but limited and needs extra forms.
• Taxes: equity funds-STCG 15%, LTCG 10% over ₹1 lakh; most debt funds taxed at slab (post Apr 1, 2023). TDS applies to NRI redemptions.
• Steps: PAN → KYC/video-KYC → FATCA-CRS → open NRE/NRO → invest via SIP/lumpsum → keep residency/KYC updated.

Non-Resident Indian (NRI) is a person of Indian origin or citizen living outside India for more than 182 days (as per Income-tax Act tests) whose Indian investments are governed by FEMA and RBI/SEBI rules.

Short answer: yes, NRIs can invest in Indian mutual funds. The catch? You must route money correctly, clear KYC and FATCA, and pick funds/AMCs that accept your country of residence. That’s it. The rest is execution.

What law actually allows this?

Mutual fund is a pooled investment vehicle regulated by SEBI that invests in securities like equities, bonds, and money market instruments. Under India’s exchange-control regime, NRIs are expressly permitted to invest in units of Indian mutual funds.

Securities and Exchange Board of India (SEBI) is India’s markets regulator that frames mutual fund regulations, disclosure norms, and investor-protection rules. SEBI regulates fund houses and distributors; it also sets KYC standards along with KRAs.

Reserve Bank of India (RBI) is India’s central bank overseeing foreign exchange flows and banking rules for NRE/NRO/FCNR accounts. RBI governs how your money enters and exits India.

Foreign Exchange Management Act (FEMA) is the law that controls cross-border transactions; it permits NRIs to invest in rupee-denominated mutual funds on repatriation or non-repatriation basis.

Put simply: SEBI regulates funds; RBI/FEMA regulates your money’s route. If you follow both, you’re good.

Who qualifies and what’s the edge cases?

If you’re an Indian citizen or of Indian origin living abroad, you’re likely an NRI. Overseas Citizens of India (OCI) and many Persons of Indian Origin (PIO) are treated similarly for investment purposes.

Edge cases:

• US/Canada residents: acceptance depends on the AMC. Expect extra FATCA forms and sometimes limited schemes.
• Gulf/UK/Australia/Singapore residents: usually straightforward onboarding.
• NRIs who recently moved: update residency in bank, PAN/KYC, and folios within 30 days to stay compliant.

Your money’s route: NRE, NRO, or FCNR?

Non-Resident External (NRE) account is a rupee account funded from foreign income; principal and interest are fully repatriable. Best if you want easy remittance of redemption money out of India.

Non-Resident Ordinary (NRO) account is a rupee account for income earned in India; repatriation is usually limited and requires tax compliance. Useful if you have Indian rental income, dividends, or pensions.

Semantic link: NRE/NRO account choice affects repatriation; repatriation impacts exit planning; exit planning influences which folio bank account you register.

KYC, FATCA, and documents you’ll actually need

For onboarding, expect these essentials:

• FATCA is the US Foreign Account Tax Compliance Act; Indian fund houses collect tax residency details under FATCA/CRS. If you’re a US tax person, you’ll give a W-9 equivalent declaration; others provide CRS self-certification.
• PAN: India’s tax identifier. Required for mutual funds; name must match KYC/bank.
• Passport + visa/residence permit: primary OVD (Officially Valid Document).
• Overseas address proof: utility bill/bank statement (recent, typically within 3 months).
• Indian bank proof: canceled cheque of NRE/NRO with IFSC and your name.
• Photo + wet/e-signature: as per AMC/RTAs. Video-KYC is widely accepted now.

Regulatory context: SEBI KRAs validate KYC; AMCs must obtain FATCA/CRS self-certification before activation. If anything changes (address, tax residency), update within 30 days. Some KRAs may periodically re-verify KYC-don’t ignore those emails.

How to invest: a clean, step-by-step path

1. Get PAN (if you don’t have one). Ensure the name matches your passport.
2. Open NRE and/or NRO bank accounts. If you plan to repatriate, prefer NRE for investments.
3. Complete KYC: submit passport, overseas address, photo, and bank proof. Opt for video-KYC to skip courier delays.
4. Submit FATCA/CRS self-certification. If US/Canada-based, ask the AMC upfront about acceptance and any extra forms.
5. Pick a platform: invest directly with the AMC or via an RTA-backed portal. Ensure it supports NRE/NRO and NRI KYC.
6. Register a SIP or do a lumpsum. NACH debits from NRE/NRO are supported by most large banks; use the same account type that matches your repatriation plan.
7. Nomination: mandatory for individual folios. Add a nominee now; it saves headaches later.
8. Power of Attorney (optional): you can authorize a resident Indian to transact, but redemption proceeds must still go to your registered NRE/NRO account.

Quick sanity checks: use your NRE account if you expect to move money out; keep tax residency updated; and store KYC acknowledgments from the KRA/AMC.

What can NRIs buy? Any fund restrictions?

Fund types you can buy are the same as residents: equity, debt, hybrid, index, sector/thematic, ELSS (subject to your Indian tax needs), and fund-of-funds. There’s no FEMA ban by category; the key issues are onboarding, tax treatment, and whether the AMC accepts your country of residence.

• Equity funds: higher risk/volatility; potential for long-term growth.
• Debt funds: lower volatility; useful for stability and INR goals. Tax changed in 2023-see the tax section.
• Hybrid funds: balanced approach. If equity exposure ≥35%, tax can follow equity-like rules; check the scheme’s category.
• ELSS: 3-year lock-in; Section 80C benefits apply only if you have taxable Indian income.

If you live in the US or Canada, a subset of AMCs onboards you with extra compliance (historically, names like UTI/PPFAS/ICICI Prudential/HDFC have supported onboarding at various times). Always confirm current acceptance at the time you apply; policies change.

Taxes for NRIs: rates, TDS, and examples

Two moving parts matter: the capital gains tax rate and the TDS the fund house deducts before paying you.

• Equity-oriented funds (generally ≥35% Indian equity): STCG (≤12 months) at 15%; LTCG (>12 months) at 10% on gains over ₹1 lakh in a financial year. Surcharge/cess may apply.
• Non-equity funds (most debt funds and many FOFs): since April 1, 2023, capital gains are taxed at slab rates without indexation for most categories. Check your Indian income bracket and DTAA relief.
• TDS for NRIs: deducted under section 195 at redemption-typically 15% on equity STCG, 10% on equity LTCG (beyond threshold), and applicable rates on non-equity. Actual TDS can vary with surcharge/cess and scheme type; AMCs/RTAs follow prevailing rules.

Worked example in simple numbers: Suppose you invest ₹10 lakh in an equity index fund on NRE, it grows 12% in a year, and you redeem in 10 months. STCG ≈ ₹1.2 lakh; TDS likely 15% ≈ ₹18,000 at source. If you instead hold for 14 months and your total equity LTCG across funds in the year is ₹1.8 lakh, taxable LTCG is ₹80,000 and tax at 10% ≈ ₹8,000 (pre surcharge/cess); TDS follows this logic.

Double taxation relief: If your resident country taxes these gains, check your Double Taxation Avoidance Agreement and claim credit/refund as applicable. Keep the TDS certificate (Form 16A) and capital gains statements handy.

Currency angle: Your home-currency return differs from INR return. If the fund earns 12% in INR and the rupee weakens 5% against your currency, your foreign-currency return is roughly (1.12 × 0.95 − 1) ≈ 6.4% before taxes. That exchange-rate swing can dominate short holding periods.

Redemption and repatriation: how money exits

Redemptions are credited to your registered bank account for the folio.

• Invested from NRE/FCNR (repatriable): proceeds go to NRE and are remittable abroad without extra hoops, subject to tax compliance.
• Invested from NRO (non-repatriable): proceeds go to NRO; outward remittance typically needs a CA certificate (Form 15CB) and Form 15CA filing. Annual limits and documentation apply.

Plan the bank account at folio creation. Switching later is possible but paperwork-heavy. Keep the same account type across SIP mandates to avoid breaks.

Costs, risks, and mistakes to avoid

• Expense ratio and exit load: check both. A 1% annual expense on ₹50 lakh is ₹50,000-feels small until compounding is cut.
• US/Canada acceptance: don’t start a SIP before the AMC confirms your residency acceptance for the specific schemes.
• Wrong bank account: investing from NRO when you planned repatriation means more friction at exit.
• KYC lapses: FATCA/CRS self-cert expiry or change in address/tax residency can freeze transactions until you update.
• Tax surprises: since April 1, 2023, most debt funds are taxed at slab rates; many NRIs still assume indexation exists. It doesn’t, in most cases.
• Currency risk: great INR returns can shrink in AUD/USD/GBP once FX moves. Hedge via global diversification or accept the INR exposure for India-linked goals.

Quick comparison: equity vs non-equity taxation for NRIs

Entities and regulators you’ll see on every form

These names will pop up again and again-knowing them speeds you up:

• Permanent Account Number (PAN) is India’s tax identifier required for mutual fund investments and KYC.
• Tax Deducted at Source (TDS) is the tax the AMC/RTA withholds on NRI redemptions before crediting your bank account.
• Double Taxation Avoidance Agreement (DTAA) is a treaty that lets you avoid being taxed twice on the same income and claim credits.
• Systematic Investment Plan (SIP) is an automated recurring investment instruction that buys mutual fund units at set intervals.

One more: AMFI (industry body) publishes KYC/distributor standards and investor education. And registrars (RTAs) like CAMS and KFintech process most folios and payouts.

Real-world scenario: an NRI in Australia

Say you earn in AUD and plan to fund a child’s Indian college costs in INR. You open an NRE account, finish video-KYC with your passport and overseas address, submit FATCA-CRS (declaring Australia as tax residency), and start a ₹25,000 SIP in a large-cap index fund and a short-duration debt fund. Five years later, you redeem to your NRE account with no repatriation forms. Your INR goal aligned with INR assets-clean and simple.

Contrast that with earning INR from a rented flat in Pune: you invest from NRO, build a corpus for property maintenance, and when you need AUD, you coordinate with a CA for 15CB/15CA and remit abroad. Same funds, different money route, very different exit friction.

Decision rules you can trust

• If goal is in INR (house in India, parent healthcare): using NRI mutual funds India through NRE/NRO is fine; FX risk matches the goal.
• If goal is in foreign currency (retirement abroad): cap India MFs to your strategic India allocation; balance with home-country assets.
• Want easy exits abroad? Prefer NRE funding where possible.
• US/Canada resident? Pre-clear AMC acceptance before raising SIP mandates.
• Debt funds for parking? Remember slab-rate taxation from Apr 1, 2023.

Related concepts worth exploring next

• How PIS/Non-PIS rules differ for direct stocks vs mutual funds
• Portfolio Management Services (PMS) and AIFs for NRIs
• NRE vs FCNR (B) fixed deposits for cash management
• NRIs and Indian life insurance/ULIPs-how they’re taxed
• Gifts, inheritance, and FEMA-moving assets across borders

Frequently Asked Questions

Can an NRI buy mutual funds in India on a repatriable basis?

Yes. Under FEMA, NRIs can invest in Indian mutual funds on a repatriable basis by using NRE/FCNR funds and registering an NRE bank account for the folio. Redemptions then credit the NRE account and can be freely remitted abroad, subject to TDS and standard banking checks.

I live in the USA/Canada. Will Indian AMCs accept me?

Several AMCs accept US/Canada-resident NRIs, but not all. Acceptance changes over time due to FATCA compliance workloads. Expect extra self-certifications and sometimes restricted scheme lists or offline onboarding. Always email the AMC for a current acceptance note and keep it on file before starting a SIP.

Do I need Aadhaar for NRI mutual fund KYC?

No. PAN is mandatory; Aadhaar is not required for NRIs. Most KRAs accept passport as OVD along with overseas address proof and bank details. Video-KYC can complete IPV (in-person verification) without travel.

How are NRIs taxed on mutual fund redemptions?

Equity-oriented funds: STCG (≤12 months) at 15%; LTCG (>12 months) at 10% on gains above ₹1 lakh per FY. Most debt/FOF units acquired on/after Apr 1, 2023 are taxed at slab rates (no indexation). AMCs deduct TDS under section 195 before crediting your NRE/NRO account. Surcharge and cess can apply. Claim DTAA relief when filing taxes in your resident country.

Can I invest from my NRO account and later repatriate the money?

Yes, but it’s more involved. Proceeds will credit your NRO account. For outward remittance you’ll typically need a CA certificate (Form 15CB) and Form 15CA filed through your bank. There may be annual caps and documentation checks. If easy repatriation is a priority, invest from NRE.

Is PIS approval required for mutual funds?

No. The Portfolio Investment Scheme (PIS) applied to direct equity trades (and has since evolved). Mutual fund investments do not require a PIS account. You only need proper KYC/FATCA and an NRE/NRO account link.

Can I appoint a Power of Attorney to operate my folio?

Yes. Many AMCs allow a resident Indian as Power of Attorney to transact on your behalf, after verifying signatures and documents. Redemption proceeds still go only to your registered NRE/NRO bank account, not to the attorney.

Will my SIP stop if I change countries?

It can, if KYC or FATCA/CRS details are outdated. Always update tax residency, overseas address, and contact details after moving. Some AMCs pause transactions until revalidation is complete. Update your bank mandates if you switch between NRE and NRO usage.

What documents should I keep for tax filing abroad?

Keep account statements, capital gains statements, TDS certificates (Form 16A), fund Fact Sheets/KIMs for cost basis dates, and bank credit advice. These support DTAA relief claims and foreign tax credits in your resident country.