Things NRIs should keep in mind when investing in Mutual Funds


27 Dec 2021 | 4 min read

A few years back, NRIs only invest in fixed deposits and real estate. However, in this changing world economy, you can explore other investment options in India. Thus, before investing in a mutual fund, being an NRI you need to know that you should avail of fixed deposit and real estate. As the best way to investment options in India such as mutual funds, liquid funds, direct equity, bonds, and government securities.  

Important things should keep in mind when investing in mutual funds in India  

The candidate should be qualified for NRI as per FEMA (Foreign Exchange Management Act). Here are the factors that NRIs should consider to invest mutual funds in India in a simple way:  

• Ensure that the qualification to be an NRI on 2000, as per FEMA notification 

The applicant should meet the following criteria to be classified as an NRI as per FEMA (Foreign Exchange Management Act):  

  • As an Indian citizen residing abroad.  
  • The applicant needs to stay in India for less than 120 days in a financial year. The 120 days condition will be applied to the applicant if your taxable income from sources in India is more than Rs. 15 lakhs in a financial year.  
  • If the applicant’s income in India is less than Rs. 15 lakhs, for taxation purposes the user can stay in India for up to 181 days in a financial year without affecting the NRI status.  

• Mutual Funds for NRIs- Investment procedure 

Here are a few steps that the applicants need to follow for investing in NRI Mutual Funds in India:  

  • Open an NRE/NRO account: It is required for NRIs to open an NRE (Non-Resident External) account or NRO (Non-Resident Ordinary) account with an Indian bank to invest in a mutual fund in India. The NRI can open a deposit the foreign earnings in Indian currency. However, an NRO account can be used to manage the income earned in India like pension, dividends, rental income, etc.  It is required to follow the essential step because AMCs (Asset Management Companies) in India that accept foreign currency investments. Once start investing in a mutual fund scheme through an NRE or NRO account, one can easily use this account type for investment in this scheme.  
  • KYC Compliance: If you are investing in mutual funds in India, you have to complete the KYC process. In that case, you need to submit the following documents for KYC compliance:  
  1. Your passport-sized photographs 
  2. Self-attested copies of your passport (only relevant pages as specified by the fund house) 
  3. Submit address proof and birth certificate  

Get the documents attested by any of the following authorities in the country of residence: The authorized official of overseas branches of a scheduled commercial bank governed by RBI, court magistrate/ judge, Public Notary, or the Indian Embassy/ consulate abroad.  Employees of the Merchant Navy need to submit a mariner’s declaration or certified copy of the Continuous Discharge Certificate.  

  • In-Person verification  

IPV or in-person verification is mandatory for the NRIs investing in mutual funds. If the user has a concerned fund house, they can ask for in-person verification. In that case, you need to visit the Indian Embassy in the country for residence. Apart from this, you can connect to the official representative at the AMC.  

  •  Investment mode 

The applicant can start investing in mutual funds online or through an appointed Power of Attorney (PoA) in India.  

  • Qualifiers  

Please note that many AMCs don’t allow NRIs from USA and Canada to invest in mutual funds in India due to compliance procedures set under FATCA (Foreign Account Tax Compliance Act). Some fund houses offer mutual funds for NRIs from USA/Canada to invest in India such as Sundaram Mutual Funds, Reliance Mutual Funds, L&T Mutual Fund, etc. but sometimes it required additional documentation and eligibility criteria.  

  • Tax implications  

India authorized a Double Tax Avoidance Agreement (DTAA) with more than 90 countries worldwide. In the case of DTAA, NRIs who paid taxes on their gains in India, won’t have to pay the tax for the same who is resident in India. This will help the user to minimize the tax liability for Indian citizens.  

The investment process of mutual fund investment process is online, can be done at any time and from anywhere. Moreover, it can be easy for NRIs can easily offset the losses on one currency with the gains on another side from their comfort. There are also have certain limitations and rules for safe and profitable investment. Learn more about some essential points that NRIs should keep in mind when investing in mutual funds.  


The applicants who invest in mutual funds not only offers good returns but also various other types of benefits such as forex gains, easy to invest online investment options, and tax exemptions in India. Thus, you can invest in mutual funds in the residential country ad get a wide range of benefits. In this way, you can contribute to the rapidly growing Indian economy. You can also check the best mutual funds for NRIs, including ICICI prudential NRI Mutual Funds, SBI NRI Mutual Funds, HDFC Mutual Funds, UTI Mutual Funds, and more. You can also use the Afinoz app for more details of mutual funds.  


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