How NRIs can invest in Indian mutual funds

Non-resident Indians (NRIs) and Overseas Citizens of India (OCIs) can invest in Indian mutual funds in much the same way as residents. The main differences are the bank account you invest from, the KYC paperwork, and how tax is collected.

Step 1: Choose the bank account

You invest in rupees, through an NRE or NRO account in India.

Mutual fund investments made from an NRE account can be repatriated with their gains. Investments made from an NRO account can be repatriated within the NRO limits.

Step 2: Complete KYC

• Passport, and OCI card if you hold one
• Proof of your overseas address
• PAN card
• A recent photograph
• A FATCA and CRS declaration about where you are tax resident

In most cases KYC can be completed digitally, including video verification, so you do not need to travel to India.

Step 3: Check your country of residence

Investors living in the US and Canada have extra reporting rules in those countries, so only some Indian fund houses accept them, often with additional declarations. Investors in the Gulf, Singapore, the UK and most other countries can invest with most fund houses.

Step 4: Understand how tax works

• Tax is deducted at source (TDS) when you redeem, at the rate for that type of fund and how long you held it
• Tax where you live: your country of residence may also tax the gains. The Double Taxation Avoidance Agreement (DTAA) between India and that country can let you claim credit for tax already paid in India
• Filing a return in India can get you a refund if more tax was deducted than you owe

Tax rates can change with each Union Budget, so check the current rates, or ask a tax adviser, before you redeem.

A SIP from abroad

A SIP works the same way for NRIs: a fixed amount is debited every month from your NRE or NRO account. If you earn in dirhams, dollars or pounds, the rupee amount stays fixed while its cost in your own currency moves with the exchange rate. Try the SIP calculator to see how a monthly amount could grow.

If you move back to India for good, tell your fund houses and your bank, so your status changes from NRI to resident. Your investments continue; only the paperwork changes.