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How can NRIs and PIOs invest in mutual funds in India?
Key Takeaways
NRIs and PIOs can invest in Indian mutual funds through NRE or NRO bank accounts.
- Investments can be done directly or via a Power of Attorney (PoA).
- KYC compliance with valid documents is mandatory to start investing.
- Tax Deducted at Source (TDS) applies on capital gains during redemption based on scheme type and holding period.
Many NRIs and Persons of Indian Origin (PIOs) face challenges when trying to invest in mutual funds in India due to regulatory concerns, account-related complexities, and lack of clarity about taxation. These barriers often discourage them from participating in India’s fast-growing financial markets. However, with the right banking partner, the process becomes much easier. IDFC FIRST Bank offers a structured, compliant, and convenient approach for NRIs/PIOs to invest in mutual funds seamlessly, using NRE or NRO accounts with complete digital access and personalised support.
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Bank accounts – Choose between NRE and NRO accounts
To begin investing in mutual funds in India, you must first open either a Non-Resident External (NRE) or a Non-Resident Ordinary (NRO) account:
1. Non-Resident External (NRE) account
NRE account is specifically designed to park your foreign earnings in India. The account operates in INR (Indian Rupees), and offers the following benefits:
- Tax-free interest on deposits.
- Funds can be freely repatriated to your overseas account.
- Accepts deposits in foreign currency and allows withdrawals in Indian currency.
- Ideal for investments as the capital and gains are fully repatriable.
2. Non-Resident Ordinary (NRO) account
NRO account is also held in INR (Indian Rupees) and helps you manage your income that is earned within India—like rent, dividends, or pension. Features include:
- Taxable interest income.
- Deposits can be made in Indian or foreign currency, but withdrawals are only allowed in Indian currency.
- Transfer of funds abroad is restricted to a specific limit.
- Suitable for reinvesting Indian income.
NRIs can now access India’s vibrant mutual fund market confidently through IDFC FIRST Bank’s seamless NRE PIS account and trusted investment ecosystem.
Investment options – Direct or via Power of Attorney (PoA)
NRIs and PIOs can choose between two routes to invest:
1. Self or direct investment
If you wish to manage your own portfolio, you can invest in mutual funds by registering with IDFC FIRST Bank.
2. Power of Attorney (PoA)
If you are not in India, you may appoint a trusted person to handle investments on your behalf using a Power of Attorney. The authorised person can make, manage, and redeem investments for you—subject to the rights granted under the PoA.
Mandatory KYC Verification
As per SEBI guidelines, Know Your Customer (KYC) compliance is a must before investing in mutual funds in India. The following attested documents are required:
- Passport
- PAN card
- PIO card (if applicable)
- Residence proof (outside India)
- Bank statement
- Recent passport-sized photograph
Once verified, your KYC record is registered with KYC Registration Agencies (KRAs), enabling you to invest across all mutual fund houses in India without repeating the process.
Taxation – Understand capital gains tax on MF redemptions
Capital gains earned through mutual fund investments are subject to Tax Deducted at Source (TDS) at the time of redemption. The tax treatment differs based on:
- Scheme type (equity-oriented or others)
- Duration of holding (short-term vs long-term)
Fund type |
For transactions before 23 July 2024 |
For transactions on or after 23 July 2024 |
Equity mutual funds |
STCG – 15% LTCG – 10% (capital gain above ₹1.25 lakh during relevant Financial Year) |
STCG – 20% LTCG – 12.5% (capital gain above ₹1.25 lakh during relevant Financial Year) |
Debt mutual funds |
STCG – As per income slab (usually 30%) |
STCG – As per income slab LTCG – 12.5% (no indexation) |
IDFC FIRST Bank ensures full compliance and transparency in tax reporting for your convenience.
Conclusion
Investing in Indian mutual funds as an NRI or PIO no longer needs to be complex. Begin your NRI mutual fund investment with IDFC FIRST Bank and get structured guidance from account opening to investment execution and taxation support. Whether you're managing global wealth or Indian income, our digital banking solutions and expert advisory services ensure that your financial journey in India is both convenient and rewarding. Begin your mutual fund investment with IDFC FIRST Bank today and stay connected to India’s financial growth story from anywhere in the world.
Disclaimer
The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.
The features, benefits and offers mentioned in the article are applicable as on the day of publication of this blog and is subject to change without notice. The contents herein are also subject to other product specific terms and conditions and any third party terms and conditions, as applicable. Please refer our website www.idfcfirst.bank.in for latest updates.
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