Introduction

Mutual Funds: A mutual fund is an investment vehicle that pools resources from multiple investors to earn returns on the overall capital in a given timeframe. Investments can be periodic – subject to Systematic Investment Plan (SIP) or one time lump sum. Equity mutual funds, debt mutual funds, thematic mutual funds, and liquid mutual funds are all categories of mutual funds.

These funds invest in various asset classes like stocks, commodities, bonds, shares and real estate assets. When investors invest in mutual funds, they buy units according to the Net Asset Value (NAV) of the fund. Each unit gives you a proportional ownership of course in the fund. Mutual funds, in a way, are structured for wealth creation in the long run.

Mutual Funds for NRIs

Investing in Indian mutual funds can be an opportunity for the Non Resident Indians (NRIs) to invest and tap one of the fastest investment opportunities growing economy in the world. With professional money management, and access to a variety of asset classes, mutual funds are a great wealth-generating vehicle available to NRIs. This article covers all the aspects of what to invest in, how to go about it, compliance requirements, specific nuances for NRIs from the US, Uk, Singapore & more.

The Question that Arises Before All : Can NRIs invest directly in mutual funds?

Yes, NRIs can invest directly in mutual funds schemes through the online portals of AMCs (Asset Management Companies manage investments, funds, and portfolios) using their NRE/NRO accounts. 

Some AMCs may have restrictions, particularly for NRIs residing in certain countries like the US and Canada. You should consult the specific AMC before making any investments. Let’s talk more in detail.

Why Should You Invest in India?

Before we tell you about why you should invest in India, as a market, let's just do a quick flashback on how the market of India has grown in the past 5 years

India's investment landscape has emerged as a beacon of opportunity for NRIs worldwide. With its rapidly expanding economy and strategic position in the global markets, India emerges as a unique destination for investments, offering growth avenues that are unmatched at times with the developed markets.

a. High Growth Potential

India’s economy is among the most dynamic globally, growing at rates significantly higher than developed countries. Driven by its young workforce, expanding middle class, and increased consumption, India offers attractive returns on investments across sectors like technology, infrastructure, and pharmaceuticals.

Example: Sanjay, an NRI in the UAE, invested $10,000 in an Indian mutual fund focused on technology and infrastructure in 2017. Over the next five years, the Indian markets saw a surge in these sectors due to rapid digitization and government-backed infrastructure projects. Sanjay's fund delivered a CAGR (Compound Annual Growth Rate) of 14%, outperforming his UAE-based equity investments, which offered a CAGR of 6% over the same period.

b. Maximizing Returns with Dollar-Adjusted Gains

Currency fluctuations often play a crucial role in enhancing returns for NRIs. While the rupee’s depreciation against major currencies is a concern, the higher growth of Indian markets can mitigate or even outweigh this effect.

For Example: Priya’s Investment Journey in Mutual Funds

Priya, an NRI in the US, invested ₹10 lakh in an Indian equity mutual fund on 1st January 2020 when the exchange rate was 1 USD = ₹70. She chose a fund aligned with the performance of the NIFTY50, India’s leading equity index, which delivered an impressive CAGR of 17.75% over the next four and a half years.

By 1st July 2024, her investment had grown to ₹18.75 lakh, reflecting a total growth of 87.5% in rupee terms. During the same period, the exchange rate shifted to 1 USD = ₹80, accounting for a currency devaluation of 17% (CAGR of 3.55%).

When converted to USD, her initial $14,286 investment grew to $23,437, a total gain of 64.1% over 54 months. This corresponds to a dollar-adjusted CAGR of 13.71%, making it a highly lucrative investment even after accounting for exchange rate changes.

Things to note in this example:

1. High Growth Potential: The NIFTY50’s strong performance highlights India’s rapid economic growth and the opportunity for NRIs to benefit from it.

2. Currency Advantage: Despite a 17% rupee devaluation, the dollar-adjusted returns remained highly competitive, outpacing many global benchmarks like the S&P 500, which grew at a CAGR of 12.69% during the same period.

3. Portfolio Diversification: Investing in Indian mutual funds not only diversifies Priya’s portfolio geographically but also enables her to capture the benefits of a fast-growing market.

c. Simplified Taxation With Double Taxation Avoidance Agreements (DTAA)

India’s Double Taxation Avoidance Agreements (DTAAs) ensure that NRIs don’t pay taxes twice on the same income. Mutual fund investments benefit from preferential tax treatment under DTAAs, resulting in no additional tax liability.

Example: Ravi, an NRI in Singapore, earned ₹5 lakh in capital gains from mutual funds in India in 2022. Under the India-Singapore DTAA, these gains were taxed in India at 12.5% for long-term equity investments exceeding ₹1 lakh. As Singapore does not tax capital gains, Ravi had no additional tax liability, ensuring his net post-tax return remained competitive compared to equivalent Singapore-based investments taxed at 20%.

In a world where growth is becoming increasingly elusive in developed markets, India offers a unique blend of growth, diversification, and wealth-building potential that few other markets can rival.

Why Choose Mutual Funds Over Other Asset Classes?

Non-Resident Indians (NRIs) often have a unique financial profile that includes earning in foreign currencies, potential tax benefits, and a need to manage wealth across borders. Mutual funds can be an excellent investment choice for NRIs compared to other asset classes due to multiple reasons like Better Diversification, high Liquidity, Cost-Effectiveness, Professional Management, Global Accessibility and more. Let’s discuss benefits of Mutual funds over other assets in detail below:

Comparison Table: Mutual Funds vs. Other Assets

Let’s delve a bit deeper into the benefits:

1. Diversification

• Mutual funds allow NRIs to diversify their investments across various asset classes (equities, debt, gold, etc.) and sectors. This reduces the overall risk compared to investing in a single asset class like real estate or stocks.

2. Professional Management

• Mutual funds are managed by experienced fund managers who actively monitor and adjust the portfolio. This makes them an attractive option for NRIs who may not have the time or expertise to manage investments directly.

3. Ease of Investment and Liquidity

• Mutual funds offer higher liquidity compared to other asset classes like real estate or fixed deposits. Most mutual funds allow you to redeem your investments partially or fully at any time, making them a flexible investment option.

• NRIs can easily invest through online platforms, simplifying cross-border investment processes.

4. Lower Entry Barriers

• Unlike real estate or direct equity investments, mutual funds have a low initial investment requirement, allowing NRIs to start small and scale up as needed.

5. Regulated and Transparent

• Indian mutual funds are regulated by SEBI (Securities and Exchange Board of India), ensuring transparency and protecting investors' interests.

6. Goal-Oriented Options

• Mutual funds offer options tailored to specific goals, such as retirement planning, education funds, or wealth creation. NRIs can align their investments with personal financial goals.

7. Lower Costs Compared to Real Estate

Investing in mutual funds is significantly cheaper than real estate, which comes with high upfront costs, ongoing maintenance, and regulatory complexities. Here’s a quick cost comparison:

Example:

• Real Estate Investment:

  • Property Price: ₹1 crore (mid-tier residential property in India).

  • Transaction Costs:

    • Stamp Duty & Registration: ~7–10% = ₹7–10 lakh.

    • Brokerage Fees: ~1–2% = ₹1–2 lakh.

  • Maintenance Costs: ₹50,000–₹1 lakh/year.

  • Total Initial + Yearly Costs: ₹8–12 lakh upfront + ₹50,000/year.

• Mutual Fund Investment:

  • Investment Amount: ₹1 crore (lump sum).

  • Transaction Costs:

  • Expense Ratio: ~0.5–1.5% annually = ₹50,000–₹1.5 lakh/year.

  • No additional fees like stamp duty or brokerage.

  • Total Costs: ₹0 upfront + ₹50,000–₹1.5 lakh/year.

Mutual funds offer NRIs a balanced approach to wealth creation, combining flexibility, liquidity, and diversification. While other asset classes may also have their advantages, mutual funds often emerge as a more practical and efficient option for NRIs, especially for medium to long-term goals.

Requirements for NRI Investments

a. Bank Accounts

When investing in Indian mutual funds, choosing the right bank account—NRE (Non-Resident External) or NRO (Non-Resident Ordinary)—is crucial for seamless transactions, compliance, and repatriation. 

1. NRE Account:

• Who Should Use It?
  NRIs earning income abroad (e.g., salaries, investments) and looking to make investments in India with funds from their country of residence.

• Features for NRIs:

  • Easy Repatriation: You can send both your investment principal and returns back to your country of residence without any restrictions.

  • Investment Flexibility: Perfect for those who wish to keep their investments flexible, ensuring easy transfer of both principal and returns internationally.

  • Example:
    Priya, based in the UK, invested ₹10 lakh from her NRE account into an equity fund. Three years later, she repatriated ₹15 lakh back to her UK bank account.

2. NRO Account:

• Who Should Use It?
  NRIs earning income in India (e.g., rental income, dividends, pensions) who want to invest in mutual funds.

• Features for NRIs:

  • Repatriation with limits: Funds in NRO accounts can be repatriated up to a specific limit per financial year (e.g., $1 million) depending on your country’s norms.

  • Convenient for Indian Earnings: Ideal for those with income sources in India who want to keep it local.

  • Example:
    Ramesh owns property in India and gets regular rental income of ₹50,000. This amount gets collected to his NRO account and Ramesh invests it into Mutual Funds via his NRO account. Since it was less than $1Mn, Ramesh could repatriate after showing proof of tax paid that he gets from his CA.

To know more about NRE/NRO accounts, click here.

Which Account Should You Choose?

ScenarioRecommended AccountInvesting foreign earnings & needs full repatriationNRE AccountInvesting Indian income (e.g., rent)NRO Account

b. Mutual Fund KYC

Why is KYC Important for Mutual Funds?

1. Regulatory Compliance:

   • Ensures that investments adhere to SEBI (Securities and Exchange Board of India) regulations.

   • Prevents fraud and illegal activities like money laundering.

   • FATCA declaration for US and Canada NRIs is done as part of KYC

2. Eligibility Validation:

   • Confirms the investor’s identity, residency, and account status (NRE/NRO).

How to Complete KYC for Mutual Funds?

1. Offline KYC

• Steps:

  • Download and fill the KYC form from the fund house or KRA website.

  • Attach photocopies of required documents:

    • PAN card.

    • Proof of identity (passport).

    • Proof of address (overseas or local).

  • Submit the form to the mutual fund house, registrar (CAMS, KFintech), or authorized distributor.

  • In-person verification (IPV) at the submission center.

• Time Required:

  • 5–7 working days for verification and approval.

• Benefits:

  • Suitable for those uncomfortable with technology.

  • Ideal if additional physical verification is needed.

  
  

2. Digital KYC Made Easy with Rupeeflo

Rupeeflo simplifies the digital KYC process for NRIs, offering a fast, paperless, and hassle-free experience. Here’s how it works:

Steps to Complete Digital KYC with Rupeeflo

1. Login and Start

   • Access the Rupeeflo app or website to begin your KYC process.

   • Enter your personal details such as Full Name, PAN, DOB, and Address.

2. Form Filling

   • Submit relevant personal and financial details. Information required for FATCA declaration for US / Canada NRIs is collected here.

3. Document Upload

   • Upload clear, scanned copies of:

     • PAN Card

     • Address Proof (overseas and/or Indian, such as utility bills, lease agreements, or bank statements not older than 3 months).

     • Passport-Sized Photograph

4. Complete Video KYC

   • Schedule and join a live video interaction directly through the app.

   • Show original documents for verification during the call.

Time Required

• Verification and approval typically take 24–48 hours, ensuring a quick turnaround time.

Why Choose Rupeeflo for Digital KYC?

• Convenience: Completely paperless and accessible from anywhere in the world.

• Efficiency: End-to-end process, from document submission to video KYC, within a few clicks.

• Compliance: Ensures adherence to FATCA and global regulatory requirements.

Summarising a comparison between the two and you can take a call on which you should go for.

Quick Tips for a Smoother KYC Process

1. Ensure your documents are updated and match your details (name, address).

2. Use a stable internet connection for video KYC.

3. Check with your mutual fund house or platform for specific requirements.

Process of Investing

Investing in Indian mutual funds as an NRI is simpler than you might think. Let’s walk through the process with a realistic example to make it relatable.

1. Open the Right Bank Account

To start investing, you’ll need either an NRE (Non-Resident External) or NRO (Non-Resident Ordinary) account.

• Why? These accounts help you route your funds into Indian mutual funds while maintaining compliance with FEMA (Foreign Exchange Management Act) regulations.

• Example: Riya, an NRI based in Dubai, opened an NRE account with SBI to make her investments fully repatriable (tax-free returns sent abroad).

2. Complete Your KYC (Know Your Customer)

Every investor in India must complete KYC before investing. NRIs can opt for Digital KYC or Offline KYC as explained earlier in this article. FATCA declaration for US & Canada residents is covered as part of KYC.

Example: Vivek, an NRI in Canada, used a video-based Digital KYC service through CAMS and got his KYC approved in 24 hours.

3. Choose Your Mutual Fund Scheme

With hundreds of schemes available, the key is to align your choice with your financial goals:

• Short-term needs: Liquid Funds or Debt Funds.

• Long-term growth: Equity Funds or ELSS (tax-saving funds).

• Example: Ankit, an NRI in Singapore, invested ₹10 lakh in an ELSS fund for dual benefits—growth and ₹1.5 lakh tax deduction under Section 80C.

4. Make Your Investment

You can invest via:

• Lump Sum: Invest a one-time amount (e.g., ₹5 lakh in a diversified equity fund).

• SIP (Systematic Investment Plan): Start small, say ₹5,000/month, and build wealth steadily.

Example: Raj, an NRI in Australia, started an SIP of ₹20,000/month in a blue-chip equity fund to save for his daughter’s education in 10 years.

(Further details about investment platforms are covered later in this article.)

5. Monitor and Manage Your Portfolio

• Use platforms like, Zerodha Coin, or fund house portals to track your investments.

• Rebalance your portfolio periodically based on market performance and personal goals.

Example: Divya, an NRI in the UK, checks her portfolio quarterly using the CAMS app and shifts funds between equity and debt schemes based on market trends.

6. Redemption

When it’s time to redeem your investments, you can:

• Initiate redemption directly through your investment platform or AMC’s portal.

• Funds will be credited to your registered NRE/NRO account, depending on the source of the investment.

7. Repatriation

If you wish to transfer your investment proceeds back to your country of residence, repatriation is an option for NRE investments.

• Ensure your NRE account is active and meets all compliance requirements.

• Example: Aman, an NRI in Singapore, redeemed ₹5 lakh from his mutual fund and repatriated the amount seamlessly using his NRE account.

Considerations for NRIs in the US and Canada

a. FATCA Compliance

The Foreign Account Tax Compliance Act (FATCA) requires NRIs, especially those from the US, to report their global financial assets, including Indian mutual fund investments, to the IRS. It ensures transparency and prevents tax evasion.

Key Points for NRIs

1. FATCA Declaration: NRIs must submit a FATCA form while investing in Indian mutual funds. This includes details like tax residency and foreign account information. This is covered as part of the KYC process.

2. Mutual Fund Restrictions: Some fund houses limit investments by US/Canada-based NRIs due to additional reporting requirements.

3. Stay Compliant: Work with tax professionals to file accurate returns and avoid penalties.

Benefits of Compliance

• Ensures smooth global financial management.

• Allows NRIs to maintain investments in India while staying tax-compliant in their resident country.

A list of mutual funds that allow investments from US & Canada

b. PFIC Tax Rules for US-Based NRIs

US-based NRIs need to be mindful of the Passive Foreign Investment Company (PFIC) tax regulations, which can impose unique tax reporting requirements on mutual fund investments. While these rules can lead to higher tax liabilities, they also provide an opportunity to explore alternative strategies that align with long-term financial goals.

Want to know more about PFIC tax regulations? Click here!

Platforms for NRI Mutual Fund Investments

1. Directly Through Fund Houses

• Description: NRIs can invest directly via the official websites of mutual fund companies like ICICI Prudential, Nippon India, HDFC AMC, etc.

• Features:

  • Online KYC

  • Easy access to fund portfolios and transactions.

2. NRI-Focused Investment Platforms

For NRIs, investing in Indian mutual funds often comes with unique challenges—compliance, documentation, and repatriation guidance, to name a few. That’s where NRI-focused platforms like Rupeeflo step in, offering tailored solutions to make the investment process seamless and stress-free.

• Examples: Rupeeflo

• Description: Platforms specifically designed for NRIs with tailored services like , digital KYC, NRI account opening, tax advisory and repatriation guidance.

• Features:

  • Personalized NRI support.

  • Simplifies compliance and helps managing investments

3. Banks with NRI Services

• Examples: SBI, Axis Bank, ICICI Bank.

• Description: NRIs can invest in mutual funds through their NRE/NRO accounts with banks offering integrated mutual fund services.

• Features:

  • Direct debit from NRE/NRO accounts.

  • Assistance with documentation.

4. Online Mutual Fund Investment Portals

• Examples: Kuvera, Zerodha Coin.

• Description: Digital platforms allowing NRIs to invest in mutual funds (restrictions may apply for US/Canada-based NRIs).

• Features:

  • Paperless onboarding.

  • Real-time tracking and portfolio management.

5. Registrars and Transfer Agents (RTAs)

• Examples: CAMS, KFintech.

• Description: RTAs manage transactions for multiple fund houses, making it easier for NRIs to invest across funds.

• Features:

  • Single platform for multiple mutual funds.

  • Online investment and KYC processing.

Taxation on Indian Mutual Funds

a. Capital Gains Tax

• Short-Term Gains (STCG):

  • Equity funds: Taxed at 15%.

  • Debt funds: Taxed as per the investor’s income slab.

• Long-Term Gains (LTCG):

  • Equity funds: 12.5% tax on gains above ₹1 lakh.

  • Debt funds: 20% tax with indexation benefits after 3 years.

b. PFIC Tax for US Residents

As explained earlier in this article, US-based NRIs need to abide by this rule. 

Conclusion: Empowering NRIs to Grow with India

As an NRI, your connection to India is more than just geographical—it's emotional, cultural, and aspirational. Investing in Indian mutual funds is not just a financial decision; it's a way to participate in the story of India's high-growth economy and tap into its immense potential.

We understand the complexities you face—navigating account types, compliance requirements, and taxation can feel overwhelming. But with the right guidance and a well-structured approach, these hurdles transform into stepping stones toward your financial goals. Whether you’re planning for wealth preservation, long-term growth, or diversifying your global portfolio, Indian mutual funds offer you the tools to achieve it.

Your journey doesn’t have to be one you navigate alone. With the right resources, platforms, and expertise, we’re here to help you unlock the opportunities that await. Together, let’s grow your wealth while keeping your roots in India strong.

Because when you invest in India, you’re not just building a portfolio—you’re building a future.