For many NRIs, money earned abroad often comes with one big question: where should it grow? While global markets offer multiple opportunities, India continues to stand out as a long-term wealth-creation destination. In fact, NRI investments in Indian mutual funds have climbed close to $30 billion, signalling strong trust in India’s financial ecosystem. With professionally manage
d funds, transparent regulations, and easy online access, mutual funds have become one of the simplest and most effective ways for NRIs to build wealth in India in 2026. Let’s understand how NRIs can invest in Indian mutual funds, the process to get started, and how taxation works.
Benefits of Mutual Fund Investing for NRIs
Access India’s Growth: Mutual funds let NRIs participate in India’s long-term growth without managing individual investments.
Smart Diversification: Money is spread across companies, sectors, and asset classes, helping reduce risk.
Power of Compounding: Staying invested over the long term, especially through SIPs, can steadily grow wealth.
Easy Liquidity: Most funds allow investors to enter or exit based on their financial needs.
Clear Repatriation Rules: Investments can be made via NRE or NRO accounts with defined repatriation options.
Step-by-Step Process: How NRIs Can Invest in Mutual Funds
Step 1: Open an NRE or NRO Bank Account
Your investment journey begins with selecting the appropriate bank account. The choice between NRE and NRO accounts depends on the source of your funds and your repatriation requirements.
An NRE account is ideal for investing foreign earnings in India. Both your principal and returns are fully repatriable, meaning you can transfer funds back to your country of residence without restrictions.
An NRO account, on the other hand, is designed for managing income earned within India, such as rent, dividends, or a pension. Repatriation from NRO accounts is limited to USD 1 million per financial year, and also the interest earned remains taxable in India.
Step 2: Obtaining Essential Documentation
A Permanent Account Number (PAN) is compulsory for carrying out any financial transaction in India. If you don’t already have one, you can easily apply through online portals.
Step 3: Completing KYC Requirements
KYC is a one-time process required to start investing in India. NRIs need to submit a PAN card, passport, overseas address proof, recent photographs, and NRE or NRO bank account details. Most institutions now offer digital KYC, making it easy to complete the process from anywhere in the world.
Step 4: Choosing Your Investment Platform
Once your documentation is in order, you have several options for investing. You can invest directly through Asset Management Companies (AMC), use SEBI-registered brokers and investment platforms, or work with financial advisors who specialize in NRI investments.
For NRIs seeking specialized guidance, platforms like Ashvvy Investments offer dedicated NRI wealth management services with expertise in cross-border taxation, FEMA compliance, and currency-aware investment strategies.
Step 5: Starting Your Investment Journey
You can invest either through lump sum contributions or Systematic Investment Plans. SIPs have gained tremendous popularity among NRIs because they enable disciplined, automated investing with amounts as modest as ₹500 per month. This approach helps you benefit from rupee cost averaging, reducing the impact of market volatility on your investments.
Taxation Rules for NRIs Investing in Mutual Funds
Understanding taxation is crucial for maximizing your post-tax returns. Following changes introduced in the Finance Act 2024 that took effect from July 23, 2024, here’s the current tax structure for NRI mutual fund investments:
Fund Type | Holding Period | Tax Rate |
Equity-Oriented Funds (≥65% equity) | Short-term (≤12 months) | 20% |
Equity-Oriented Funds (≥65% equity) | Long-term (>12 months) | 12.5% (₹1.25 lakh per year exemption) |
Debt Funds (≥65% in debt) | Any holding period | As per the tax slab |
Hybrid mutual funds are taxed based on their equity allocation. Funds with 65% or more equity exposure are treated as equity funds for taxation, while those with less than 65% equity are taxed like debt funds, with gains taxed according to applicable income tax rules.
DTAA: Avoiding Double Taxation for NRIs
India has signed Double Taxation Avoidance Agreements (DTAA) with several countries such as the UAE, US, UK, Singapore, and others to prevent NRIs from being taxed twice on the same income.
Under DTAA:
- Income earned in India may be taxed in India, the country of residence, or both, depending on the treaty
- Taxes paid in India can generally be claimed as a credit in the country of residence
- In some cases, the applicable tax rate in India may be reduced as per treaty provisions
To claim DTAA benefits, NRIs must submit:
- Tax Residency Certificate (TRC)
- Form 10F
- DTAA declaration (while filing returns or as required)
Since DTAA rules differ by country and type of income, consulting a financial professional is advisable.
Conclusion
Mutual funds are a convenient and effective way for NRIs to build long-term wealth in India. With proper planning around bank accounts, taxation, and repatriation rules, investing can be smooth and hassle-free. Understanding DTAA benefits and staying compliant with regulations further helps protect returns. When chosen thoughtfully, mutual fund investments can fit well into an NRI’s overall financial plan and support long-term goals.
