NRIs can absolutely invest in Indian mutual funds — and many do, to keep a rupee allocation while living abroad. Two things make NRI mutual fund investing different from a resident's: TDS is deducted on every redemption gain (residents pay tax later, by self-assessment), and US/Canada-based NRIs face FATCA restrictions on which fund houses will accept them. This guide covers how to invest, how each fund type is taxed, and the compliance you need to know. Rates and rules are as of FY 2025-26 (June 2026); verify before transacting.
How NRIs invest in Indian mutual funds
- Complete NRI KYC — passport, visa/OCI proof, overseas address proof, an Indian PAN, and a FATCA/CRS declaration.
- Route through an NRE or NRO account — invest on a repatriable basis via NRE (proceeds usable abroad), or non-repatriable basis via NRO (capped repatriation).
- Check the AMC's US/Canada policy — several fund houses restrict or decline US/Canada NRIs due to FATCA; some accept them only via offline forms.
Once invested, you can run growth projections with our SIP calculator — just remember the tax below applies to NRIs at redemption.
TDS at source — the key NRI difference
The fund house deducts TDS on your gain every time you redeem, before crediting the proceeds. A resident, by contrast, receives the full amount and settles tax in their return. So an NRI's mutual fund returns are net of TDS by default — you may then reclaim excess via a return or reduce it under a DTAA. Because NRIs cannot claim the Section 87A rebate (see our NRI tax slab guide), there is no resident-style tax-free cushion.
Capital-gains tax rates for NRIs (FY 2025-26)
| Fund type | Holding period | Gain type | Tax rate (NRI) |
|---|---|---|---|
| Equity-oriented | 12 months or less | Short-term (STCG) | 20% |
| Equity-oriented | More than 12 months | Long-term (LTCG) | 12.5% above ₹1.25 lakh/yr |
| Debt (bought on/after 1 Apr 2023) | Any | Taxed at slab rate | Applicable slab rate |
Rates as of FY 2025-26; surcharge and 4% cess apply on top, and the equity LTCG exemption of ₹1.25 lakh is per financial year. Capital-gains rules change in Budgets — verify the current rates.
Equity vs debt — what the rules mean for you
Equity funds get the favourable 12.5% long-term rate (above the ₹1.25 lakh exemption) once held beyond a year, making them the more tax-efficient long-term choice. Debt funds bought after April 2023 lost their indexation benefit and are now taxed at your slab rate regardless of holding period — which, for an NRI without the 87A rebate, can bite early. Match the fund type to your horizon and your other Indian income.
FATCA and the US/Canada restriction
FATCA obliges Indian fund houses to report accounts held by US persons, and the compliance load means many AMCs restrict or refuse investments from US- and Canada-based NRIs. Some accept them only through physical/offline forms; others decline entirely. If you're a US- or Canada-resident NRI, shortlist the fund houses that accept you before planning an allocation, and complete the FATCA/CRS declaration accurately during KYC.
Where the proceeds go
Redemption proceeds follow your account choice: NRE-routed (repatriable) investments can be sent back abroad after tax; NRO-routed (non-repatriable) ones face the USD 1 million annual cap — the trade-off is in our NRE vs NRO guide. If you're also dealing with Indian property or your old EPF, see NRI property sale TDS and PF withdrawal for NRI.