How NRI’s can invest in Mutual funds in India

How NRI’s can invest in Mutual funds in IndiaHow NRI’s can invest in Mutual funds in India

For several years, NRI’s have been traditionally investing in Real Estate investments in India. However a recent study indicates that NRI’s have shifted their main focus from real estate to Mutual funds in India. In this article we would discuss about how NRI’s can invest in mutual funds in India

What is NRI’s focus now?

In the recent study conducted by a top investment company in India, it indicates that in the last 10 years, real estate investment has given an average return of 15% to 18% and stock market has provided a similar return. However mutual funds have performed well and some of the equity mutual funds have yielded more than 20% annualized returns. It says that NRI’s has been slowly shifting their main focus from Real Estate to Mutual funds. No doubt that, due to recently fall in rupee value, mutual fund companies would increase their focus on NRI investors to attract more investments.

Also read: Best Large Cap Mutual funds to invest for long term

How NRI’s can invest in Mutual funds in India?

NRI’s can invest in mutual funds in India, however there is little different process compared to normal Indian residents.

1) Set-up a bank account: NRI’s need to set-up a bank account in India to move their money to India. They can open NRE Account or NRO Account.

NRE Account: Non-resident External Rupee account (NRE) is preferable as it gives flexibility of repatriation of proceeds out of India without any restriction.  If you want to invest in mutual fund from your overseas earnings, you SHOULD have NRE account.

NRO Account: Non-Resident ordinary account is normal bank account which an NRI generally keeps to collect any receipts within India like rent etc.

2) Open a mutual fund account with any broker: There are several mutual fund brokers like ICICI or etc. where you can open the mutual fund account. You need to submit the following documents to open the account.

  • PAN Card – Self attested copy
  • KYC Certificate – Some brokers would ask you to do your own KYC process. However a broker like would do this automatically through the database based on PAN Card.
  • Bank account – NRE/NRO account need to be opened. You need to provide current statement of account or cancelled cheques pertaining to the account.
  • Foreign address – You need to provide self attested utility bill or driving license which contains address proof of your foreign country.
  • Indian passport – Attested copy

Once you submit the above copies with any mutual fund broker, they would open the mutual fund account.

3) Start investing in mutual funds: Once you open the account, you can start investing in mutual funds online.

Are there any restrictions for NRI’s to invest in mutual funds?

NRI’s from most countries can invest in all mutual funds in India. However, for US based NRI’s, it is bit tricky. Most US head quartered fund houses that operate out of India, do not accept mutual fund investments from US based NRI’s due to a rule laid by US security Exchange Commission (SEC) which says only those fund houses, globally or locally, registered with SEC can accept US NRI or citizen money. Some of the US based fund houses in India like Franklin Templeton or Morgan Stanley mutual fund houses in India don’t accept US NRI’s mutual fund investments.

NRI’s from other countries can invest in mutual funds with no hassle.

Alternative options for NRI’s to invest in mutual funds

Several mutual funds in US have India dedicated mutual funds even those which have Indian subsidiaries. They invest based on Indian subsidiary research. E.g. Franklin Templeton India Growth Fund in US invests in India.

In other countries, Indian mutual fund houses have opened their branches or networks like UTI, Kotak AMC, Reliance AMC, and Birla AMC etc which opened branches in Gulf and South Eastern Asian countries like Singapore. They float India based mutual funds which invests mainly in India.

NRI’s can invest through those mutual funds to tap the opportunities from Indian market.

Also read: How mutual fund returns are taxed?

What is the tax liability for NRI’s for Mutual fund returns?

There is no separate tax structure for NRI’s and normal residents. Below is the generally tax structure. For detailed note, you can refer the Mutual fund taxation article.

                        Short Term capital gain       Long term capital gain

Debt MF’s          15%                                   NIL

Equity MF’s       As per tax slab              – 10% without indexation                                                                      

                                                                 – 20% with indexation

Conclusion: Mutual funds investments have been providing good returns if you invest for long time. With falling rupee value, NRI’s should invest in such good investment options to maximize their returns.

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How NRI’s can invest in Mutual funds in India

Suresh KP


  1. What are top 3 funds currenly, in moderate risk/moderate return category.

    Is there a trusted site which gives listings on the funds in India


    1. Stalin. There are no such top 3 funds. It would depend on which mutual fund category you want to invest. If you obseve our blog it shows top funds in each and every category like diverisifed, liquid funds, debt mutual funds, balanced funds etc. You can refer to valueresearchonline or which provides comprehensive list of mutual funds, their rankings, returns etc.

  2. Hi Suresh,

    Considering a 10 year investment horizon, moderately aggressive and age <30, I tried building a SIP portfolio in Fundsinda. The annualized ROI offered seems lower than NRE RD offerings which is around 9% return. Would it make sense to invest in RD since the rates have gone up and is non-taxable.


    1. Denny, Review your funds portfolio. If you invest in diversified, large cap, sector based funds and debt funds, your portfolio returns cannot be < 9%. Go thru the funds suggested in fundsindia and refer my articles about such recommendations. 

  3. Hi,

    It is good article for NRI's ..
    i have one question..If I am going to invest in India MF's from my NRE account then should I have to declare this In US ITR.. because every income earn from INDIA should have to declare in US ITR if we invest through NRE accounts..please sugesst me where I can invest money which should be tax free from INDIA as well as from US.


    I am in US right now and origin from INDIA.




    1. Harish, I can provide advice in India and not able to advice on US Tax laws. Since you have tax query about Indian income whether to be included in US IT Return or not, please consult you tax consultant. 

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