Introduction

Are you an NRI based in the US or Canada considering investing in Indian mutual funds? You might be wondering if it’s possible or if the process is too complicated. The good news is that you can absolutely invest in Indian mutual funds, though there are a few unique steps you’ll need to follow, especially because of FATCA (Foreign Account Tax Compliance Act) regulations. Let’s break it all down for you.

Why Are Mutual Fund Options Limited for US/Canada NRIs?

When it comes to mutual funds, NRIs from the US and Canada have fewer options compared to other NRIs. This is due to the compliance requirements set by FATCA. Many Indian Asset Management Companies (AMCs) prefer not to deal with the additional paperwork and regulations required for US and Canada-based investors, which limits your choices. However, there is still a way forward!

Currently, 8 AMCs accept investments from US and Canada NRIs. These include:

• Birla Sun Life Mutual Fund

• SBI Mutual Fund

• UTI Mutual Fund

• ICICI Prudential Mutual Fund

• DHFL Pramerica Mutual Fund

• L&T Mutual Fund

• PPFAS Mutual Fund

• Sundaram Mutual Fund

What are the Available Investment Options?

Even though you have fewer options as a US or Canada NRI, you can still pick from a variety of mutual fund types based on your financial goals. Here’s a quick look at the main types:

1. Equity Funds

These funds invest in the stock market, making them ideal for people looking to grow their money over time. While they carry higher risk, they also offer the potential for higher returns. If you're okay with some ups and downs, equity funds can be a good choice. 

Here are some equity funds that US / Canada NRIs can invest in that have performed well over the last few years

Aditya Birla Sun Life Focused Equity Fund

• 3-Year CAGR: ~12.63 %

• 5-Year CAGR: ~16.32 %

SBI Long Term Equity Fund

• 3-Year CAGR: ~24.1%

• 5-Year CAGR: ~24.37%

ICICI Prudential Midcap Fund

• 3-Year CAGR: ~20.23%

• 5-Year CAGR: ~24.54%

Note - All data noted above is dated at 31st December 2024.

2. Debt Funds

Debt funds are safer because they mainly invest in bonds or other fixed-income securities. They offer lower returns compared to equity funds, but they’re a good option for those who want stable and consistent returns with less risk.

Here are some debt funds that US / Canada NRIs can invest in that have performed well over the last few years

Aditya Birla SL Medium Term Plan

• 3-Year CAGR: ~14.18 %

• 5-Year CAGR: ~11.32 %

ICICI Pru Credit Risk Fund

• 3-Year CAGR: ~6.9%

• 5-Year CAGR: ~7.33%

UTI Dynamic Bond Fund

• 3-Year CAGR: ~9.63%

• 5-Year CAGR: ~9.47%

Note - All data noted above is dated at 31st December 2024.

3. Hybrid Funds

Hybrid funds combine both equity and debt investments. This gives you a balance of higher potential returns and some stability. If you want to have a mix of growth and safety, hybrid funds can be a good middle-ground choice.

Here are some hybrid funds that US / Canada NRIs can invest in that have performed well over the last few years

Aditya Birla Sun Life Balanced Advantage Fund

• 3-Year CAGR: ~10.53%

• 5-Year CAGR: ~12.29%

SBI Equity Hybrid Fund

• 3-Year CAGR: ~10.62%

• 5-Year CAGR: ~13.43%

ICICI Prudential Equity & Debt Fund

• 3-Year CAGR: ~18.82%

• 5-Year CAGR: ~20.95%

Note - All data noted above is dated at 31st December 2024.

Steps to Invest in Indian Mutual Funds as a US/Canada NRI

If you’re ready to start investing, here’s what you’ll need to do:

1. Complete the KYC Process

The first step is completing the Know Your Customer (KYC) process, which involves submitting necessary documents like proof of identity, address, and your NRI status. The good news is that your FATCA declaration is automatically included as part of this process, so there’s no extra paperwork required.

2. Open an Indian Bank Account

To invest in mutual funds, you’ll need an Indian bank account. Since mutual funds in India only accept investments in Indian Rupees (INR), you have a few options to choose from:

• NRE (Non-Resident External) Account for repatriable investments (money that can be transferred back to your home country).

• NRO (Non-Resident Ordinary) Account for non-repatriable investments (money that stays in India).

Rupeeflo offers a platform to digitally open NRE or NRO accounts in partnership with leading banks in India.

3. Choose an Approved AMC

You can only invest in Indian mutual funds through AMCs that are FATCA-compliant. Select one of the 8 AMCs listed earlier and review the funds they offer to match your investment strategy.

4. Invest Directly or Through a Power of Attorney (PoA)

Once you’ve selected your mutual fund, you can either invest directly or assign a Power of Attorney (PoA) to manage the investments on your behalf. If you choose the PoA route, both you and the PoA will need to complete the KYC process.

Rupeeflo simplifies the investment process for NRIs by offering an easy-to-use platform for KYC completion. It also provides a mutual fund buy/sell platform that filters the AMCs eligible for US/Canada NRIs to invest in, eliminating the need for NRIs to manually select AMCs, saving both time and effort.

PFIC Taxation for US NRIs

If you’re a US-based NRI, you should be aware of the tax treatment of Indian mutual funds. According to US tax laws, Indian mutual funds are considered Passive Foreign Investment Companies (PFICs). This classification may lead to different tax implications and reporting requirements, which could impact your returns. For more information on PFIC, click here.

However, for NRIs in Canada, there’s good news. Canadian tax regulations do not impose the same requirements, making it a bit easier for Canadian NRIs to invest in Indian mutual funds without worrying about the additional complexities.

Conclusion

Investing in Indian mutual funds as an NRI in the US or Canada is very much possible, but there are a few extra steps and limitations to keep in mind. You can easily choose the mutual fund offered by the 8 AMCs allowing US/Canada NRIs to invest.