Mutual funds are among the most preferred investment options in India. The Indian mutual fund industry has demonstrated remarkable growth, with Assets Under Management (AUM) surging from ₹22.26 trillion in March 2020 to ₹69.50 trillion by April 2025, more than a threefold rise in just five years. Many overseas Indians wonder whether an NRI can invest in mutual fund options in India. With growing financial literacy and SIP popularity, NRIs have attractive investment options.

India's growing economy offers attractive opportunities for NRI investment in India, and mutual funds provide a professionally managed investment option. This guide will walk you through everything that you need to know about mutual funds for NRIs – from eligibility to taxation.

How Can NRIs Invest in Mutual Funds?

Investment in MF is a popular choice for NRIs looking to diversify their portfolios while maintaining investments in India. There are specific accounts and processes designed for this purpose.

Required Accounts

NRIs can invest in mutual fund products by opening any one of the following specialised accounts:

• Non-Resident External (NRE) Account: For income earned outside India; funds are fully repatriable.
• Non-Resident Ordinary (NRO) Account: For income earned in India; partial repatriation is possible.

Investment Modes through SBI

NRIs can invest through SBI's comprehensive suite of services designed specifically for non-resident investors:

• Direct Investment: NRIs are allowed to directly invest with Asset Management Companies like SBI Mutual Fund, which offers a wide range of fund options with competitive expense ratios.
• SBI's Global NRI Services: Access to dedicated relationship managers specialising in NRI investments with personalised portfolio guidance.
• SBI's Digital Platform: The user-friendly internet banking web portal provide convenient 24/7 access for mutual fund investments from anywhere in the world.
• Power of Attorney (POA): SBI facilitates NRI investments through trusted representatives in India who can manage mutual fund transactions on behalf of NRIs, offering a practical solution for those constrained by time zones or limited availability.

Types of Mutual Funds Available for NRIs

SBI Mutual Fund offers comprehensive options for NRIs:

• Equity Funds: SBI Mutual Fund's equity fund portfolio includes small-cap, mid-cap, large-cap, and multi-cap options, designed for long-term capital appreciation and wealth creation
• Debt Funds: SBI Mutual Fund offers money market funds, government securities funds, corporate bond funds, and dynamic duration funds designed to provide steady income and capital preservation for conservative investors.
• Hybrid Funds: With conservative, aggressive and multi asset allocation hybrid options, SBI Mutual Fund's hybrid fund offerings combine equity, debt and/or commodity instruments allocations to deliver risk-adjusted returns suitable for moderate-risk investors seeking diversification and asset allocation in a tax efficient way.
• Index Funds: SBI Mutual Fund provides access to cost-effective index funds and ETFs tracking major market indices.
• Thematic/Sector Funds: Specialised themes/ sector-focused funds target high-growth industries such as technology, healthcare, banking, infrastructure etc.

With assets worth approximately ₹7.9 lakh crore and a market share of nearly 18% as of March 2025, SBI Mutual Fund stands as one of India's largest and most trusted AMCs for NRI investors. NRIs can also set up a SIP for NRI accounts, enabling regular, disciplined investments.

Tax Implications for NRI Mutual Fund Investments

Understanding NRI mutual fund taxation is crucial before investing:

Capital Gains Tax

Taxation for equity oriented mutual fund (min. 65% investments in listed domestic equities) schemes for FY 25-26 is as under:

• Short Term Capital Gains (STCG):
  • Holding period: Up to 12 months
  • Taxed at: 20% (#)
• Long Term Capital Gains (LTCG):
  • Holding period: More than 12 months
  • Taxed at: 12.5% on gains exceeding ₹1.25 lakhs per annum (#)

Taxation for hybrid mutual fund (up to 65% investments in listed domestic equities and/or debt) schemes for FY 25-26 is as under:

• Short Term Capital Gains (STCG):
  • Holding period: Up to 24 months (unlisted) or Up to 12 months (listed)
  • Taxed at: Slab Rates
• Long Term Capital Gains (LTCG):
  • Holding period: More than 24 months (unlisted) or more than 12 months (listed)
  • Taxed at: 12.5% on gains without indexation benefit (#)

Taxation for debt-oriented mutual fund (more than 65% investments in debt) schemes for FY 25-26 is as under:

• Short Term Capital Gains (STCG):
  • Holding period: N.A.
  • Taxed at: Slab Rates

(#) plus Surcharge & Cess

TDS for NRI Mutual Fund Investments

NRIs are subject to mandatory TDS on mutual fund redemptions with updated rates effective July 23, 2024:

• The Mutual Fund will pay/deduct taxes as per the applicable tax laws on the relevant date considering the provisions of the Income-tax Act, 1961 read with the Income-tax Rules, 1962 and any circulars or notifications or directives or instructions issued thereunder. Please note that grant of DTAA benefit, if any, is subject to fulfilment of stipulated conditions under the provisions of the Income-tax Act, 1961 and the relevant DTAA as well as interpretation of relevant Article of such DTAA.
• TDS on Income Distributions (IDCW Option):
  • In case of non-resident investors (other than FII): As per provisions of Section 196A, TDS is applicable on any income in respect of units of a Mutual Fund at lower of 20% or rate of income-tax provided in the relevant DTAA (read with CBDT Circular no. 3/2022 dated 3rd February 2022), provided such investor furnishes valid Tax Residency Certificate (TRC) for concerned FY.
  • In case of FII: As per provisions of Section 196D, TDS is applicable at lower of 20% or rate of income-tax provided in the relevant DTAA (read with CBDT Circular no. 3/2022 dated 3rd February 2022), provided such investor furnishes valid Tax Residency Certificate (TRC) for concerned FY.
• TDS on Capital Gains: Tax will be deducted on Short-term/Long-term capital gains at the tax rates (plus applicable Surcharge and Health and Education Cess) specified in the Finance Act 2025 at the time of redemption of units in case of Non-Resident investors (other than FIIs) only.
• TDS at higher rates: In case PAN is not furnished or PAN is inoperative, then TDS as per Section 206AA of the Income-tax Act, 1961 would apply (higher of specified rate or rates in force or 20%), subject to Rule 37BC of the Income-tax Rules, 1962.
• TDS Certificate: Fund houses issue Form 16A reflecting taxes deducted and deposited in respect of PAN of the investor.

Double Taxation Avoidance Agreement (DTAA)

India has DTAA with many countries, which can help avoid paying taxes twice. Check if your resident country qualifies for DTAA benefits to reduce your tax burden in India.

Repatriation Rules for NRI Mutual Fund Investments

Investments in MF through NRE Accounts:

Funds invested in Indian mutual funds via NRE are fully repatriable. This means both the principal and returns can be transferred abroad without any restrictions or upper limits, provided the investor continues to maintain NRI status at the time of repatriation. There are no caps on outward remittance from NRE accounts. Fund houses may require proof of inward remittance to validate the source of investment in compliance with FEMA regulations.

Investments through NRO Accounts:

• FEMA rules for NRI investment permit repatriation of up to $1 million per financial year from NRO accounts.
• This limit includes all types of assets (not just mutual funds) being repatriated in a financial year.
• Repatriation requires an authorised dealer bank's certification via Form 15CA/15CB.
• A chartered accountant must certify that appropriate taxes have been paid using Form 15CB.
• For amounts exceeding $1 million annually, special RBI permission is required.
• NRO account repatriations are subject to TDS as per applicable tax rates before funds can be transferred overseas.

Key Documents Required for NRI Mutual Fund Investment

To start your NRI investment in India through mutual funds, you'll need:

• Passport with visa information
• Permanent Account Number (PAN)
• Overseas address proof
• Indian bank account details (NRE/NRO)
• Recent passport-size photographs
• Income proof
• FATCA declaration

How to Start Investing in Mutual Funds as an NRI through SBI

Here's a step-by-step guide to begin your investment journey with SBI:

• Open SBI NRI Accounts: Set up NRE/NRO accounts via SBI branches in India or overseas geographies.
• Access SBI's NRI Investment Portal: Register on SBI Mutual Fund's dedicated NRI investment page https://www.sbimf.com/nri-corner and submit FATCA self-declaration and FIRC documentation.
• Connect with SBI's NRI Relationship Manager [Optional]: Consult with SBI's specialised NRI investment advisors for personalised guidance on fund selection and compliance requirements.
• Select SBI Mutual Funds: Choose from equity, debt, hybrid, and thematic fund categories based on your investment goals.
• Set Up Auto-Debit Facility: Arrange for SIPs through auto-debit feature from NRE/NRO account through SBI's secure payment gateway.
• Monitor via YONO SBI App: Track portfolio performance with real-time updates.

Ensure proper documentation of inward remittance when transferring funds to for mutual fund purchases.

Start Your NRI Mutual Fund Journey Today

Investments in MF offer NRIs an excellent opportunity to participate in India's economic growth while building long-term wealth. With proper account setup and tax understanding, NRIs can successfully invest through SBI's comprehensive platform. Consider starting with SIPs for disciplined investing or explore lump-sum options based on your financial goals.

Work with a financial advisor who understands the regulations of NRI investment in India, to develop an investment strategy that fits your personal needs and financial goals.

Important Tax Disclaimer

Please note that the tax rates and regulations mentioned in this article reflect the current tax structure as per Finance Act 2025, following significant changes in capital gains taxation for mutual fund investments. Tax laws are subject to periodic amendments by the Government of India. The information provided here is for general guidance only and should not be considered as professional tax advice. NRIs are strongly advised to consult with qualified tax professionals or chartered accountants familiar with current tax regulations before making investment decisions. Always verify the latest tax rates and compliance requirements with official sources or your financial advisor, as these may change from time to time.