Non-resident Indians can invest in Indian mutual funds without any cap on the amount. The practical questions are which bank account the money comes from, whether the fund house will accept you at all (a real issue for US and Canada residents), how much tax is deducted when you sell, and how you get the money back out. This guide covers each for tax year 2026-27, including RBI's June 2026 changes.
Two definitions of "NRI", and why both matter
For tax, status depends on days you spend in India in the year. You are resident if you were in India 182 days or more, or 60 days or more plus 365 days in the previous four years. For an Indian citizen who leaves for a job abroad, and for a citizen or person of Indian origin visiting India, the 60 days becomes 182 (or 120 if Indian income is over ₹15 lakh). Tax status decides your tax rates and TDS. Check yours with the NRI residential status calculator.
For FEMA (foreign exchange law), status depends on why and how long you are staying outside India, for example for a job or with the intention to stay abroad. FEMA status decides which bank accounts you may hold and how your investment is routed. The two can differ in the year you move, so check both.
Who can invest
Under the FEMA rules, NRIs and Overseas Citizens of India (OCIs) may buy Indian mutual fund units without limit:
- Funds with more than 50% in equity are covered by the Non-Debt Instruments Rules: Schedule III on a repatriable basis, Schedule IV on a non-repatriable basis.
- Funds with 50% or less in equity (debt, liquid, gold and similar funds) are covered by the Debt Instruments Regulations, Schedule 1, with the same two routes.
Most mutual fund units are bought directly from the fund house (AMC) or through a platform. Only ETFs trade on the stock exchange.
Repatriable vs non-repatriable: the two routes
| Repatriable basis | Non-repatriable basis | |
|---|---|---|
| How you pay | Inward remittance from abroad, or from a repatriable account (NRE, FCNR(B)) | From an NRO account (NRE, FCNR or remittance funds can also be used) |
| Where sale proceeds go | Abroad, or to any FEMA deposit account you choose | Only to your NRO account |
| Taking money abroad | Freely, after tax | Only through the NRO facility of up to US$1 million per financial year, after tax |
What changed in June 2026. RBI amended the FEMA rules on 12 and 13 June 2026. For repatriable investing under Schedule III, money now flows through a "designated repatriable rupee account" funded from any repatriable account. This replaces the old "NRE (PIS)" label used for stock-exchange investing. The amended rules also confirm that repatriable mutual fund sale proceeds can go abroad or into any FEMA account. Many banks, platforms and AMC forms still use the older NRE/PIS wording. If yours does, ask which account they want you to use. The NRE vs NRO account guide explains the accounts themselves.
RBI also published draft Foreign Investment Rules for comment in July 2026. They are not final and may renumber these schedules.
KYC and FATCA
You need KYC completed with your status recorded as non-resident. Expect to provide:
- PAN;
- passport (and OCI card if you hold a foreign passport);
- overseas address proof;
- proof of your NRE or NRO bank account;
- a FATCA/CRS self-declaration listing your country of tax residence and foreign tax ID (for example, SSN in the US or NRIC/FIN in Singapore).
Documents may need to be attested if you are not in India. If you were investing as a resident and then moved abroad, update your KYC status and switch the linked bank account from a resident account to NRE or NRO. FEMA does not allow a non-resident to keep operating a resident savings account.
US and Canada residents: no legal bar, but limited access
Nothing in RBI or SEBI rules stops a US or Canada resident NRI from investing in Indian mutual funds. The limits are commercial decisions by fund houses and platforms, driven by US and Canadian securities laws and FATCA reporting. In practice:
- Some AMCs accept US/Canada residents only with an extra signed declaration. Nippon India Mutual Fund's form (version 1.8, 8 February 2022) requires you to confirm you were not solicited in your country of residence. It also reserves the AMC's right to reject your investment or redeem units it has already allotted.
- DSP Mutual Fund's declaration for US-based NRIs requires that the transaction was submitted while you were physically present in India. You must also confirm that you are an "accredited investor" under US Regulation D.
- Platforms differ. ICICI Direct offers equity trading to US and Canada based NRIs but excludes mutual funds and IPOs for them. Zerodha says it does not offer mutual funds to NRIs from the US or Canada.
Policies change. Before investing, ask the AMC directly whether it accepts residents of your country, and on what conditions. We do not list "accepting" AMCs because those lists go out of date quickly and are rarely published by the AMCs themselves.
Tax on redemption (tax year 2026-27)
From 1 April 2026, sales fall under the Income-tax Act, 2025. The rates are the same as last year; the section numbers are new.
| Fund type | Short-term | Long-term |
|---|---|---|
| Equity-oriented (65%+ in Indian equity) | Held 12 months or less: 20% | Held over 12 months: 12.5% on gains above ₹1.25 lakh a year |
| Hybrid funds with 35% to 65% equity; international and gold fund-of-funds | Held 24 months or less: slab rate | Held over 24 months: 12.5% |
| Listed gold, silver and international ETFs | Held 12 months or less: slab rate | Held over 12 months: 12.5% |
| Debt funds (over 65% debt) bought on or after 1 April 2023 | Always slab rate, whatever the holding period | |
| Debt fund units bought before 1 April 2023 | Held 24 months or less: slab rate | Held over 24 months: 12.5%, no indexation |
NRIs do get the ₹1.25 lakh exemption on long-term equity gains. NRIs cannot use the basic exemption limit to absorb gains taxed at special rates, so tax can be due even when your other Indian income is small. For the full resident-and-NRI picture see mutual fund taxation in 2026.
TDS when you redeem
For an NRI, the AMC or its registrar deducts tax at source on the gain at every redemption, including long-term gains. The rates for tax year 2026-27 (Finance Act 2026) are:
| Gain | TDS rate |
|---|---|
| Equity short-term gain | 20% |
| Long-term gain (equity or other) | 12.5% |
| Other short-term gains (slab-rate gains) | 30% |
Surcharge is nil if the income subject to deduction is up to ₹50 lakh. Above that it is 10%, rising to 15% above ₹1 crore, and capped at 15% on capital gains. A 4% cess is added on top. The legal provision is section 393(2) of the new Act (the old section 195).
TDS often ends up higher than your final tax. Common reasons:
- a flat surcharge applied below ₹50 lakh;
- no credit for the ₹1.25 lakh exemption;
- losses not set off.
The excess comes back only if you file a return; see the NRI ITR filing guide.
Treaty relief on mutual fund gains
- US and UK: the treaties let each country tax capital gains under its own law. India taxes the gain, and you claim a credit at home. Treaty caps on interest and dividends do not reduce TDS on mutual fund gains.
- Singapore and UAE: income tax tribunals have held that gains on Indian mutual fund units by residents of these countries fall under Article 13(5) and are taxable only in the country of residence. The rulings are Mumbai in 2025 (Anushka Sanjay Shah, Singapore) and Cochin in 2019 (K.E. Faizal, UAE). The reasoning is that units are not shares. This is not settled law. You need a Tax Residency Certificate and the treaty declaration (Form 41 from 1 April 2026, formerly Form 10F), and TDS is usually deducted anyway, so the claim is made through your return.
Getting money back out
Repatriable-route proceeds can be sent abroad after tax. For NRO money, you can remit up to US$1 million per financial year after tax. For such remittances the bank asks for:
- Form 145 (formerly 15CA), the remitter's declaration;
- Form 146 (formerly 15CB), a chartered accountant's certificate, needed when the taxable remittance exceeds ₹5 lakh in the financial year.
See how to repatriate money from India for the bank-side steps.
Currency: your real return is in your home currency
A fund's rupee return is not what you earn if you will spend the money abroad. On 28 September 2026 the reference rates were about ₹96.0 per US dollar and ₹75.1 per Singapore dollar. Over the past 10 and 20 years the rupee has weakened by roughly 3.7% a year against the dollar on average.
Illustrative example (not a forecast): if a fund earns 12% a year in rupees and the rupee weakens 3.7% a year against the dollar, the dollar return is about 1.12 ÷ 1.037 − 1 = 8.0% a year, before tax and conversion costs. Past currency moves do not predict future ones, but the gap is worth building into any plan.
US residents: the PFIC problem
For US tax, Indian mutual funds are generally treated as Passive Foreign Investment Companies (PFICs). The default PFIC rules tax gains as ordinary income and add an interest charge spread over your holding period. You file Form 8621 for each fund every year your aggregate PFIC holdings exceed US$25,000 (US$50,000 joint), and in any year you sell or receive a distribution. Indian accounts also count towards FBAR (over US$10,000 aggregate at any time in the year) and Form 8938 (over US$50,000 at year-end or US$75,000 at any time for a single filer living in the US).
Read the PFIC guide for Indian mutual funds and model your own numbers with the PFIC tax calculator before you invest. The tax drag can outweigh the fund's return. The same guide covers FBAR and Form 8938 reporting of your Indian accounts.
Common mistakes
- Investing as a resident after moving abroad. Update KYC and switch to NRE/NRO.
- Using NRO money when you will want it abroad. Non-repatriable proceeds can only leave through the US$1 million NRO facility, with paperwork.
- Buying ELSS with no Indian taxable income. The deduction (section 123, old 80C) is available only under the old regime and only helps if you have Indian income to set it against.
- Not filing a return. Over-deducted TDS is lost unless you claim it.
- US residents ignoring PFIC. Run the PFIC calculator first.
This guide explains the rules. It is not a recommendation to buy any fund. Check AMC acceptance and your own tax position before investing.