India’s mutual fund industry is booming, with assets under management (AUM) crossing ₹54 trillion in 2025 (AMFI data). For US-based NRIs, Green Card holders, and OCIs, this growth story is too big to ignore.
But here’s the challenge: investing from the US is not as simple as clicking “buy.” You’re navigating two tax regimes, compliance laws like FATCA and FBAR, and restrictions by Indian fund houses.
This guide breaks it down step by step, from setting up your accounts to handling US tax filings — so you can invest confidently and avoid regulatory headaches.
The Crucial First Step: NRE vs. NRO Accounts
NRE (Non-Resident External) Account
- Best for: Investments funded from your overseas income.
- Benefits: Interest is tax-free in India and both capital and gains are fully repatriable.
- Use case: Ideal as your primary account for investing in mutual funds.
NRO (Non-Resident Ordinary) Account
- Best for: Income earned in India (rent, dividends, pension, etc.).
- Drawback: Interest is taxable in India, and repatriation is capped at $1 million/year with extra paperwork.
Getting Verified: The NRI KYC Process
To invest in Indian mutual funds, NRIs must complete KYC (Know Your Customer) verification.
Actionable Checklist: Documents You’ll Need
- PAN Card (Mandatory)
- Passport & US Visa/Green Card copy
- US Address Proof (utility bill, driver’s license)
- Indian Address Proof (if available)
- Photograph & signature specimen
💡 Pro tip: Complete this via KYC Registration Agencies (KRAs) or directly with your chosen AMC before wiring funds.
The Big One: US Reporting (FATCA & FBAR)
FATCA (Foreign Account Tax Compliance Act) Explained
- FATCA is a reporting requirement, not a tax.
- AMCs share your account information with the IRS for transparency.
FBAR (FinCEN Form 114) Explained
- Mandatory if your foreign financial accounts (including mutual funds) exceed $10,000 combined at any point in a year.
- Non-compliance penalties are severe, up to $10,000+ per violation.
The Challenge: Why Some Indian Fund Houses Say “No” to US NRIs
Many AMCs restrict US NRIs due to high compliance costs under FATCA.
US-NRI Friendly AMCs (2025)
- ICICI Prudential Mutual Fund
- HDFC Mutual Fund
- SBI Mutual Fund
- UTI Mutual Fund
⚠️ Disclaimer: Always verify with the fund house before investing — AMC policies change frequently.
The Step-by-Step Investment Process
- Fund your NRE account.
- Select your fund category:
- Equity funds (high growth, higher risk).
- Debt funds (stable, lower risk).
- Hybrid funds (balanced).
- Invest via AMC websites, MF Utility (MFU), or fintech platforms that support NRI onboarding.
SIP or Lumpsum? What’s Better for an NRI?
- SIP (Systematic Investment Plan):
- Helps with rupee-cost averaging.
- Builds long-term discipline.
- Lumpsum:
- Better for deploying large, one-time amounts.
- Best used after market corrections or windfalls.
Taxation in India (At the Source)
- Equity Funds:
- STCG (<12 months): 15%
- LTCG (>12 months): 10% beyond ₹1 lakh/year
- Debt Funds:
- STCG: Taxed at your slab rate
- LTCG (no indexation from 2023 change): 20%
👉 TDS (Tax Deducted at Source): Indian AMCs deduct tax before remitting gains to NRIs.
Taxation in the US (On Worldwide Income)
- The US taxes you on all global income, including your Indian mutual fund gains.
- You must report gains on your annual Form 1040.
The Solution: The DTAA (Double Taxation Avoidance Agreement)
- India and the US have a DTAA in place.
- You can claim a Foreign Tax Credit (FTC) in the US for taxes already paid in India.
- Example: If India deducts ₹1,00,000 as LTCG tax (~$1,200), you can offset $1,200 against your US tax liability.
The Redemption Process
- Redeem units online through your AMC or distributor.
- Sale proceeds are credited to your NRE/NRO account (depending on source).
Bringing it Home: Repatriation
- Funds invested via NRE account are fully repatriable.
- NRO redemptions are capped at $1M/year and require Form 15CA/CB compliance.
Conclusion: Your Best Practices Checklist & Final Advice
Quick Recap Checklist
[✓] Use your NRE account for new investments.
[✓] Only invest with FATCA-compliant AMCs.
[✓] File FATCA and FBAR diligently.
[✓] Keep TDS certificates for FTC claims in the US.
The Golden Rule: Your Final Call to Action
Investing as a US-based NRI requires compliance discipline as much as investment acumen. To protect your wealth, always consult a Chartered Accountant in India and a CPA in the US who specialize in cross-border taxation.
FAQ
Q1. Can US NRIs invest in Indian mutual funds?
Yes, but only through AMCs that accept FATCA-compliant investors. Always confirm with the fund house before investing.
Q2. Is income from Indian mutual funds taxable in the US?
Yes. The US taxes worldwide income. However, you can claim a Foreign Tax Credit for taxes already paid in India.
Q3. Which account should I use — NRE or NRO?
Prefer an NRE account for investments, as it’s tax-free in India and fully repatriable. Use NRO only for India-sourced income.
Q4. What happens if I don’t file FATCA/FBAR?
Non-compliance can lead to heavy penalties (up to $10,000+ per violation) and IRS scrutiny.
