NRIs and Mutual Fund Investment

Published on December 24, 2025 | 4 min read

As India embraced globalisation, the number of Indians living outside has been on the increase. The government has made it easier for Non-resident Indians(NRIs) to invest in Indian equity markets. Also, as the digital infrastructure improves, NRI investing is becoming more seamless. All of this combined has increased the participation of the NRI fraternity in Indian financial markets. Mutual funds, being one of the most preferred vehicles to invest in equity markets, have seen a surge in investors, both resident Indians and those living abroad. Under FEMA (Foreign Exchange Management Act), NRIs are allowed to invest in Indian mutual funds. Just that, for those living in the United States or Canada, have additional compliance restrictions, which can be adhered to with the right guidance.

The NRI Investing Ecosystem

FEMA (Foreign Exchange Management Act) The Foreign Exchange Management Act, 1999, is the main legislation governing NRI investments in India. Under FEMA, NRIs are allowed to invest in mutual funds, both repatriable and non-repatriable.

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FEMA has categorised investors as,

NRIs

Indian citizens residing outside India for employment, business or other purposes

PIOs (Persons of Indian Origin)

Foreign citizens of Indian origin

OCIs (Overseas Citizens of India)

Foreign nationals who were eligible to become citizens of India

Bank Account Requirements

NRIs must have specific bank accounts in India to invest in mutual funds

NRE Account (Non-Resident External)

Maintained in Indian rupees
Funded through foreign currency transfers from abroad
Both principal and interest are fully repatriable
Interest earned is tax-free in India
Joint accounts allowed only with other NRIs
Ideal for NRIs who want to bring money to India and later repatriate it

NRO Account (Non-Resident Ordinary)

Maintained in Indian rupees
Can be funded through rupee income earned in India (rent, dividends, pension)
Principal repatriation limited to USD 1 million per financial year
Interest earned is taxable in India
Joint accounts can be held with resident Indians
Suitable for managing India-sourced income

Linking Accounts with Mutual Funds

When investing, NRIs must

Link their NRE or NRO account with the mutual fund folio
Ensure the bank account is active and KYC (Know Your Custometr) compliant
Use the same account for investments and redemptions to maintain proper audit trails
The choice of account determines repatriation status

KYC Requirements for NRIs

NRIs must complete KYC before investing. Required Documents Passport (with photo, name, date of birth, address) Valid visa or work/residence permit Overseas address proof Permanent Indian address (optional but useful) PAN card (mandatory) FATCA declaration form

Modes of KYC

The KC can be done both in offline mode by submitting notarised documents or through online mode by doing on-call verification through a video call. Central KYC Registry – This is a one-time process. You complete KYC with one mutual fund house, and that fund house uploads the KYC to a Central KYC Registry, where all the details are stored. So now, there is no need for repeated KYC when investing with other fund houses.

How Can NRIs Invest in Mutual Funds?

NRIs can invest in mutual funds through three modes. First is the online mode, in which one can invest online through the websites of mutual fund companies or investment platforms like Upstox. The other method is investing offline by filling out physical application forms and submitting them to the fund house. Another option is to appoint a power of attorney holder in India who can make investments on their behalf.

Investment Options

Based on the underlying asset, Indian mutual funds are categorised into funds like equity funds, debt funds, hybrid funds and tax-saving ELSS funds. NRIs can invest in all of types of mutual funds, through both systematic investment plans (SIPs) for regular monthly investments or one-time lump sum investments.

Tax Considerations

Taxation in India for NRIs is the same as for resident Indians. So, for NRIs, capital gains from mutual funds are taxable in India. Short-term capital gains and long-term capital gains are taxed as per prevailing tax laws. Additionally, NRIs should consider the tax laws of the country they reside in, as some countries tax global income. To avoid this double taxation, India has signed tax treaties with many countries. NRIs should consult tax advisors to understand their complete tax obligations.

Repatriation of Funds

Repatriation rules depend on whether they invested through an NRE or NRO account. Funds from NRE accounts can be freely repatriated, while NRO account transfers have certain limits.

The government of India has been continuously evolving its regulations for more NRIs to invest in Indian mutual funds. This, along with improved and secured digital investment options, NRIs can invest with ease and accessibility.

About Author

Pradnya Surana

Sub-Editor

is an engineering and management graduate with 12 years of experience in India’s leading banks. With a natural flair for writing and a passion for all things finance, she reinvented herself as a financial writer. Her work reflects her ability to view the industry from both sides of the table, the financial service provider and the consumer. Experience in fast paced consumer facing roles adds depth, clarity and relevance to her writing.