NRI Corner
Who is an NRI?
A person is considered an NRI (Non-Resident Indian) if both of the following conditions are not met:
- They were in India for 182 days or more during the financial year, OR
- They were in India for at least 60 days in the current year AND 365 days or more during the last 4 years.
If someone doesn’t meet these conditions, they are treated as an NRI for tax purposes.
Who is a person of Indian origin (PIO)?
A Person of Indian Origin (PIO) is someone who:
Is a foreign citizen (but not from Pakistan, Afghanistan, Bangladesh, China, Iran, Bhutan, Sri Lanka, or Nepal),
And either held an Indian passport at some point,
OR has parents, grandparents, or great-grandparents who were born in India and lived here permanently (as per laws defined in 1935 or later Indian territories),
As long as they were never citizens of the countries listed above,
OR is married to an Indian citizen or another PIO.
What are the different types of rupee accounts that are permitted and can be maintained by NRIs?
A NRI can maintain three types of rupee accounts in India as mentioned below –
- NRE: Non-Resident (External) Rupee Account
- NRO: Non-Resident (Ordinary) Rupee Account
- FCNR- B: Foreign Currency (Non -Resident)
What are NRE and NRO accounts?
NRE (Non-Resident External) Account:
It’s a bank account in Indian Rupees (INR) for NRIs.
You can open it using money sent from abroad or from another NRE/FCNR account.
You can freely send the money back (repatriate) to your foreign account.
Interest earned is tax-free in India.
You can use the money for any legal purpose in India.
NRO (Non-Resident Ordinary) Account:
Also in Indian Rupees, this account is for money earned in India (like rent, pension, etc.) or sent from abroad.
Money cannot be freely sent abroad—there are limits and rules.
Repatriation is possible but needs approvals and follows current RBI rules.
Interest is taxable in India.
What is the distinction between NRE and NRO accounts?
Balances held in NRE accounts can be repatriated abroad freely, while funds in NRO accounts cannot be remitted abroad but have to be used only for local payments in rupees. Funds due to the non-resident account holder which do not qualify, under the Exchange Control regulations, for remittance outside India are required to be credited to NRO accounts.
Which Mutual Fund houses (AMCs) accept investments from NRIs or PIOs?
Not all Indian Mutual Fund companies allow NRIs, especially those from the USA and Canada, to invest in their schemes. This is because of strict compliance rules under FATCA (Foreign Account Tax Compliance Act) in those countries.
However, the following Asset Management Companies (AMCs) do accept investments from NRIs and PIOs from the USA and Canada. Some of them may ask for a physical FATCA declaration or other paperwork during the investment process.
List of Mutual Fund Houses accepting NRI (US/Canada) investments:
- Aditya Birla Sun Life Mutual Fund
- Axis Mutual Fund
- Bajaj Finserv Mutual Fund
- Bandhan Mutual Fund
- DSP Mutual Fund
- Edelweiss Mutual Fund
- Groww Mutual Fund
- HDFC Mutual Fund
- ICICI Prudential Mutual Fund
- IIFL Mutual Fund
- ITI Mutual Fund
- Kotak Mahindra Mutual Fund
- Motilal Oswal Mutual Fund
- Nippon India Mutual Fund
- PPFAS Mutual Fund
- Quant Mutual Fund
- SBI Mutual Fund
- Sundaram Mutual Fund
- Samco Mutual Fund
- UTI Mutual Fund
- Whiteoak Mutual Fund
Can NRIs from rest of the world (except from US and Canada) invest in Indian Mutual Funds?
NRIs from countries other than the USA and Canada can invest in almost all Indian mutual fund schemes.
They can invest on a repatriable (money can be sent back abroad) or non-repatriable basis, following the rules under FEMA (Foreign Exchange Management Act).
For these NRIs, the investment process is just like it is for resident Indians—straightforward and hassle-free.
How the dividends and redemption proceeds are paid to NRIs?
Normally, dividends and redemptions are paid through direct credit to the designated bank account provided by the NRI in the scheme.
Is the indexation benefit allowed to NRIs?
Yes, the indexation benefit is allowed to NRIs. Generally indexation benefit is required to be taken into account after 3 years of holding the units in Mutual Funds, while calculating long term capital gains taxes for specified mutual funds which have 35% – 65% of the portfolio in Equity
What is the taxation of mutual funds for NRIs?
Equity Mutual Funds (or Equity-Oriented Funds):
If you sell before 1 year → 15% tax on gains (plus surcharge & cess).
If you hold for more than 1 year:
Gains up to ₹1 lakh/year → No tax
Gains beyond ₹1 lakh → Taxed at 10% (plus surcharge & cess)
Debt Mutual Funds (For investments made till 31st March 2023):
Held for less than 3 years → Gains taxed as per your income tax slab, plus surcharge & cess
Held for more than 3 years (if listed) → 20% tax after indexation, plus surcharge & cess
This tax treatment was valid only till March 31, 2023
New Rules (For investments from 1st April 2023):
No indexation benefit on debt funds anymore
Gains from debt and debt-oriented funds will now be taxed as per your income slab, just like Fixed Deposits
The surcharge rates vary as per income as shown below –
How and when Tax is deducted (TDS) at source in case of NRIs?
When NRIs sell (redeem) their mutual fund units, TDS (Tax Deducted at Source) is applied automatically at the time of redemption—no matter how small or big the gain is.
The TDS rate depends on:
Type of mutual fund
How long the investment was held
Equity Mutual Funds:
LTCG (held >1 year) → TDS @ 10%
STCG (held ≤1 year) → TDS @ 15%
Non-Equity Mutual Funds (like Debt Funds):
LTCG (held >3 years):
Listed funds → TDS @ 20% (with indexation benefit)
Unlisted funds → TDS @ 10% (without indexation)
STCG (held ≤3 years) → TDS as per your income slab, usually assumed to be 30% for NRIs
Surcharge & Cess apply wherever applicable.
What are Growth and Dividend Options in a Mutual Fund Scheme?
Mutual Funds offer different ways for investors to receive profits. The two main options are Growth and Dividend (IDCW).
In the Growth option, any profits made by the fund (through dividends, interest, or buying and selling shares) are not given to the investor right away. Instead, the profits are reinvested to grow the investment further. Over time, this leads to more wealth due to compounding. The NAV (Net Asset Value) keeps increasing.
In the Dividend option (IDCW), profits are paid out to investors from time to time—monthly, quarterly, or yearly. This is better for people who need regular income.
There is also a Dividend Reinvestment option. Here, instead of giving the money to the investor, the dividend is used to buy more units of the fund. So your investment keeps growing like the Growth option, but in a slightly different way. The tax treatment for Growth and Dividend Reinvestment options is not the same.
Is mutual fund dividends tax free for NRIs?
Dividends received from mutual funds are taxable in the hands of the investors. It is added to the income of the investor while filing IT returns.
When certificate of TDS is issued to NRIs?
Like resident individuals, TDS certificates (Form 16A) are issued on a quarterly basis to NRIs and emailed to their registered email ID with the AMC or sent through post. The same can also be viewed online after registering with TRACES (TDS reconciliation Analysis and Correction Enabling System) https://contents.tdscpc.gov.in/
What are the KYC and FATCA requirements in case of NRIs?
NRIs will need to submit following documents to the AMC (mutual fund house) or the RTA (Registrar and Transfer Agent) for fulfilling the mutual funds KYC requirements –
- Self-attested copy of PAN
- Self-attested copy of Passport/ PIO Card
- Address proof (both Indian and Overseas)
- Passport size photograph
- Duly filled in KYC Form along with color passport size photograph
- Additional information required for FATCA (Foreign Account Tax Compliance Act) – Tax number of country of residency (Other than India).
- Income Slab
- Occupation
- Total net worth
- Declaration, if you are politically exposed or not
How to get KYC and FATCA requirements fulfilled in India?
When NRIs visit India, they can easily complete their KYC and FATCA process by:
Visiting a mutual fund distributor or
Going to a mutual fund registrar office (like CAMS or KFintech)
with the required documents.
At the same time, the In-Person Verification (IPV) will also be done. IPV means an authorized person will check your original documents in your presence and confirm your identity. Once done, you’re all set to start investing in mutual funds.
How to get In-person verification (IPV) done if the NRI is not in India?
If you’re an NRI visiting India, you can complete your KYC and FATCA process easily.
Just visit a mutual fund distributor or a mutual fund registrar office (like CAMS or KFintech) with the required documents.
In-Person Verification (IPV) and document checks will be done on the spot.
After that, submit the KYC form and documents to the distributor, AMC, or R&T agent.
The KYC will be updated in the system in a few weeks.
Alternatively, if you’re still abroad, you can reach out to a distributor or AMC in your country. They can help initiate IPV there. Then, your KYC form and documents can be submitted through them.
To check your KYC status, visit https://www.cvlkra.com and click on the ‘KYC Inquiry’ tab. Just enter your PAN number.
Can a NRI make a nomination in his investments?
An NRI can make a resident Indian or NRI/PIO his nominee in the mutual fund schemes in which he has invested. An NRI can also be the nominee for investments made by a local resident Indian individual. Fund houses also allow an NRI to have a joint holding with a resident Indian or another NRI / PIO in a scheme.
Can a NRI invest in Mutual Fund Tax Savings Schemes?
Yes, an NRI/PIO can invest in ELSS (Equity Linked Savings Schemes) of Mutual Funds if he or she is willing to avail tax rebate under Section 80C of The Income Tax Act 1961. Currently the investment limit is Rs. 150,000 (Rupees One Lac Fifty Thousand only) in a financial year.