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how can nri s invest in mutual funds in india

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Mutual Fund investment helps NRI investors to invest in a well diversified portfolio of debt, equity and short-term securities. NRIs are allowed to invest in all Indian mutual funds enabling them to indirectly participate in stock market. They can avail benefits like professional management, risk diversification, liquidity and tax advantages by investing in mutual funds.

How can an NRI invest?

Mutual fund investment has become hassle free now a day and you can invest in mutual funds without much paperwork once the KYC process is complete. NRI investors require a PAN which acts as proof of identity for investing in mutual funds. NRI can invest in all forms of mutual fund and can even choose SIP(Systematic Investment Plan).

Steps to follow for investment in mutual funds is summarised below:

1.    Get a PAN – Pan acts as proof of identity and you cannot invest without a pan.

2.    Fulfil KYC procedure and open an NRE or NRO account – NRE account is preferable as it allows hassle free repatriation. Go for NRO account if you do not plan to take your money back and have source of income in India (like rent from property).

3.    Instruct your bank regarding mutual fund investment – Banks will help you plan your investment and even provide you advisory services. Most of the banks will help you achieve your objectives without involving any manual process. Your bank funds and mutual fund units will be automatically debited or credited as per instructions.

Keep in mind, as an NRI, you are not allowed to invest in foreign currency and you must have an account in India. You need to convert your money to INR in NRE or NRO account before the investment. This restriction exposes you to currency risk.

Taxation of Mutual Fund Investment by NRI

NRI’s are taxed at higher rate and are not eligible for deductions or exemptions as enjoyed by resident Indians. A brief summary of taxation of mutual fund investment is presented below.

Taxation on Dividend Received

NRI Tax Rate


Equity oriented schemes


Debt oriented schemes


Dividend Distribution Tax (payable by the fund House)

Equity oriented schemes


Money market and Liquid schemes

25%+10% Surcharge+3% Cess = 28.3%

Debt schemes

25%+10% Surcharge + 3% Cess = 28.3%

Infrastructure Debt Fund

5%+10% Surcharge+3% Cess = 5.7%

Taxation on Capital Gains

NRI Tax Rate

Long Term Capital Gains (Holding period more than 12 months)

Equity oriented schemes


Non Equity oriented schemes

10% without indexation or 20% with indexation whichever is lower

Short Term Capital Gains (Holding period less than 12 months)

Equity oriented schemes


Non Equity oriented schemes

30% (For Highest tax bracket)

Tax Deducted at Source (Applicable only to NRI Investors)

Equity oriented schemes

Short term capital gains = 15%, Long term capital gains = Nil

Non Equity oriented schemes

Short term capital gains = 30%, Long term capital gains = 20% with indexation

Sometimes, you will find a mismatch between TDS cut by the fund house and your actual tax liability. In such case, you will have to claim refund while filing your income tax return.

** Tax rates are subject to change. Please visit income tax website to know the current rates.


Redemption amount, dividend income or capital gains are payable in Indian Rupees only. This amount can be repatriated if NRI investment is done using NRE account. In case of repatriation, NRI investors have to bear the currency risk.


SIP Maturity Calculator

Monthly SIP Calculator

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