Can NRIs in the US and Canada Invest in Indian Mutual Funds? (2026)
Last updated: 13 October 2026
Quick answer: Yes. Indian rules allow NRIs in the US and Canada to invest in Indian mutual funds, but only a minority of fund houses accept them, usually with a FATCA declaration and sometimes paper forms only. Canadians face ordinary capital-gains tax and T1135 reporting. US residents face PFIC rules that can tax gains at up to 37% plus interest, so plan the US tax first.
Last updated: 13 October 2026 Quick answer: Yes. Indian rules allow NRIs in the US and Canada to invest in Indian mutual funds, but only a minority of fund houses accept them, usually with a FATCA declaration and sometimes paper forms only. Canadians face ordinary capital-gains tax and T1135 reporting. US residents face PFIC rules that can tax gains at up to 37% plus interest, so plan the US tax first. Key takeaways Legal position: neither SEBI nor FEMA bars US or Canada NRIs; the refusals are AMC business decisions. Open doors: roughly 8–11 AMCs are reported to accept them; policies vary by scheme and channel. US tax: Indian funds are PFICs; Form 8621 is due for each fund, and default rules tax gains at the top 37% rate plus interest. Canada tax: no PFIC regime; T1135 applies once foreign property cost exceeds C$100,000. India tax: TDS on redemption at 12.5% (equity LTCG) or 20% (STCG), plus surcharge and cess. Ask a US-based Indian engineer why they do not own Indian mutual funds, and you will usually hear one of two answers. Either their application was rejected, or a CPA warned them about something called PFIC. Both reactions are understandable, and both are often misread. NRIs in the US and Canada can invest in Indian mutual funds. The real questions are which fund houses will take the money, what paperwork they demand, and whether the tax at home makes it worthwhile. This guide covers all three, as of October 2026, with separate sections for US and Canadian residents. Can NRIs in the US and Canada invest in Indian mutual funds? Yes. Under FEMA and SEBI rules, any NRI or OCI cardholder can invest in Indian mutual funds through an NRE account (repatriable) or NRO account (non-repatriable). There is no rule that singles out residents of the US or Canada. The restriction comes from the fund houses. Most asset management companies (AMCs) simply decline applications with a US or Canadian address, or accept them only under conditions. A 2017 Mint report, reproduced on PPFAS Mutual Fund's website, counted eight fund houses that accepted such investors. Broker compilations in 2025 and 2026 list around ten or eleven. Why do most AMCs refuse US and Canada NRIs? Three overlapping reasons explain the reluctance: Local securities law. Offering fund units to residents of the US or Canadian provinces can be treated as a public offer there, needing registration that Indian AMCs do not hold. AMCs avoid any appearance of soliciting these investors. FATCA reporting. The US Foreign Account Tax Compliance Act requires foreign financial institutions to identify and report US account holders. India implements FATCA and the OECD's CRS through its tax law, and AMCs must report details of such investors. Extra compliance for a small client group is a cost many AMCs choose not to bear. Legal risk. An AMC that markets to US persons could face regulatory action abroad. Accepting only unsolicited, paper-based applications with a signed declaration is how the willing AMCs manage that risk. Canada gets bundled with the US mainly for the first reason: provincial securities rules. Canada has its own tax-information exchange too, under the CRS. Comparison of Indian mutual fund investment rules for NRIs in the US and NRIs in Canada Which AMCs accept investments from US and Canada NRIs? No regulator publishes an official list, and AMC policies change without notice. The table below shows fund houses that recent industry compilations most often name. Treat it as a starting point for your own enquiry, not a guarantee. Fund house Conditions most often reported SBI Mutual Fund Offline application with a signed FATCA-related declaration ICICI Prudential Mutual Fund Offline application with a signed declaration Aditya Birla Sun Life Mutual Fund Additional FATCA declaration; online route reported UTI Mutual Fund Standard NRI KYC plus declaration; confirm mode Nippon India Mutual Fund Standard NRI KYC plus declaration; confirm mode PPFAS, Sundaram, Tata, Canara Robeco, HSBC (formerly L&T), Quant Named in one or more lists; conditions not consistently published Expect inconsistencies. Some investment platforms show a fund as closed to US and Canada investors even where the AMC itself accepts direct paper applications. Some AMCs have historically insisted the investor be physically present in India when signing. International fund-of-funds and feeder schemes often carry their own eligibility rules. Before investing, get the AMC's current position in writing, including which schemes and which channels are allowed. A mutual fund distributor can usually obtain this quickly; see our page on mutual fund investing (/products/mutual-funds) . How do US and Canada NRIs invest: step by step Open an NRE or NRO account. Use NRE for money sent from abroad so that redemptions stay repatriable. Our guide to NRE vs NRO vs FCNR accounts (/insights/nre-vs-nro-vs-fcnr-accounts) explains the difference. Complete NRI KYC. You need PAN, passport, overseas address proof and a photograph, with in-person or video verification. If your KYC shows "on hold", fix it first; see MF KYC status explained (/insights/mutual-fund-kyc-status-validated-registered-on-hold) . Choose an AMC that accepts you and confirm the scheme is open to US or Canada residents. Submit the FATCA/CRS self-certification and any extra US/Canada declaration the AMC requires. Invest via the permitted channel, which may be paper forms sent to India. SIPs are usually possible once the folio exists. Plan your home-country reporting before the first rupee goes in. Steps for NRIs in the US and Canada to invest in Indian mutual funds How are Indian mutual funds taxed in India for NRIs? India taxes NRIs on capital gains from Indian mutual funds at the same rates as residents. The difference is that tax is deducted at source on every redemption, under section 393(2) of the Income-tax Act 2025. Fund type Holding period Indian tax rate Equity-oriented funds Up to 12 months 20% short-term capital gains Equity-oriented funds Over 12 months 12.5% on gains above ₹1.25 lakh a year Debt funds bought on or after 1 April 2023 Any Slab rate; TDS at 30% Surcharge and 4% cess apply on top, and TDS is often higher than your final liability. Filing an Indian return recovers any excess. Our guide on capital gains tax on mutual funds in 2026 (/insights/capital-gains-tax-mutual-funds-2026) covers the details, and the NRI taxation guide (/insights/nri-taxation-india-guide) explains DTAA relief. Under the India–US and India–Canada tax treaties, India generally keeps the right to tax these gains. Your country of residence then taxes them too and gives credit for Indian tax, within its own limits. The PFIC problem for NRIs in the US A Passive Foreign Investment Company (PFIC) is, broadly, a non-US company whose income is mainly passive or whose assets mainly produce passive income. Indian mutual funds fit that description, so US tax law treats them as PFICs. This applies to US citizens, green-card holders and anyone who is a US tax resident. How PFIC tax works The IRS Form 8621 instructions (revised December 2025) describe three regimes: Default "excess distribution" rules (section 1291). On sale, the whole gain is spread across your holding period. The part allocated to earlier years is taxed at the highest ordinary rate for each year, currently 37%, plus an interest charge. The current-year slice is ordinary income. Long-term capital gains rates do not apply. Qualified Electing Fund (QEF) election. Usually better, but it needs a PFIC Annual Information Statement from the fund. Indian AMCs generally do not provide one, so QEF is rarely available. Mark-to-market election (section 1296). For marketable stock, you report the yearly rise in value as ordinary income, even without selling. Many US advisers apply it to Indian funds because units are redeemable at a daily NAV, but confirm eligibility with your CPA. You generally file a separate Form 8621 for each PFIC. Part I of the form is not required if your total PFIC holdings are worth $25,000 or less ($50,000 on a joint return) at year end and you had no excess distribution or sale. A sale still triggers reporting. PFIC tax on Indian mutual funds compared with a US-listed India ETF for a US-resident NRI Worked example. Anil, a US green-card holder in a 24% bracket, makes a $30,000 gain over five years. Through a US-listed India ETF, long-term gains tax at 15% is $4,500. With a mark-to-market election on an Indian fund, he pays 24% each year, about $7,200 in total. Under the default rules, $24,000 of the gain is taxed at 37% and $6,000 at 24%, roughly $10,320 before the interest charge. Credit for Indian tax helps, but often not fully. Other US reporting Indian mutual funds also count towards the FBAR (FinCEN Form 114), required when your foreign accounts together exceed $10,000 at any time in the year. Form 8938 applies once foreign financial assets exceed $50,000 at year end, or $75,000 at any time, for a single filer living in the US. Penalties for missed forms can exceed the tax itself. US and Canada reporting thresholds for NRIs holding Indian mutual funds: FBAR, Form 8938, Form 8621, T1135 How are Indian mutual funds taxed for NRIs in Canada? Canada has no PFIC regime, which makes Indian funds far simpler for Canadian residents. Gains are taxed as ordinary capital gains when you sell, and half the gain is included in income. A proposal to raise the inclusion rate to two-thirds was cancelled in March 2025. You claim a foreign tax credit for Indian tax paid, within Canadian limits. Canada does have "offshore investment fund property" rules that can, in narrow cases, attribute income from foreign funds annually. They are rarely applied to ordinary portfolio investors, but ask your accountant. The main burden is reporting. Under CRA guidance, Form T1135 is required if the total cost of your specified foreign property exceeds C$100,000 at any time in the year, even if you sold it later. Units of a non-resident mutual fund count; the test uses cost, not market value. A simplified method applies while total cost stays below C$250,000. Is it worth investing, and what are the alternatives? For Canadian residents, Indian mutual funds can work well if the paperwork is handled. For US residents, the decision is closer. The case is stronger if you plan to return to India and may give up US tax residency, or if amounts are modest and you elect mark-to-market. US-based NRIs who want India exposure often consider these routes instead: US-listed India ETFs. These are US-domiciled, so they are not PFICs and qualify for normal capital-gains treatment. Costs and index exposure differ from Indian funds. Direct Indian shares. Shares of operating companies are generally not PFICs. You need a PIS-enabled NRE or NRO demat route; see NRI investing from Pune (/insights/nri-investment-advisor-in-pune) . PMS. A portfolio management service holds shares in your own demat, not fund units, which can avoid the PFIC issue, though not every PMS accepts US residents. The ₹50 lakh minimum makes it suitable only for larger portfolios; read our PMS guide (/insights/pms-india) . NRE and FCNR deposits. Simple and repatriable, though the interest is taxable in the US. GIFT City funds. Dollar-denominated, but many also exclude US persons. Check eligibility; see our GIFT City guide (/insights/gift-city-investing-guide) . If you are moving back, your US status matters more than your address. A US citizen remains subject to PFIC rules even after settling in India. A returning green-card holder who gives up US residency can invest freely once that is done. Our guide to RNOR status and tax planning (/insights/returning-nri-rnor-tax-planning) covers timing. Related reading NRE vs NRO vs FCNR accounts (/insights/nre-vs-nro-vs-fcnr-accounts) NRI taxation in India: residency, TDS, DTAA (/insights/nri-taxation-india-guide) Moving back to India: RNOR status and tax planning (/insights/returning-nri-rnor-tax-planning) Capital gains tax on mutual funds in 2026 (/insights/capital-gains-tax-mutual-funds-2026) GIFT City investing guide (/insights/gift-city-investing-guide) Frequently Asked Questions Is it illegal for a US resident NRI to invest in Indian mutual funds? No. Indian law under FEMA and SEBI permits NRIs anywhere to invest in Indian mutual funds, and US law does not prohibit owning them. The limits come from AMCs declining to accept US investors, and from US tax rules that treat the funds as PFICs. The holding is legal; the tax and reporting simply need careful handling. Can I start a SIP from the US or Canada? Usually yes, once you have a folio with an AMC that accepts US or Canada investors. The SIP is debited from your NRE or NRO account through a mandate. Some AMCs that accept only paper applications also need the SIP form on paper. For US investors, each SIP instalment adds to PFIC record-keeping. What happens if I invested while living in India and then moved to the US? You must update your residential status and KYC with the AMC. Some AMCs that do not accept US residents may block fresh purchases while letting you hold or redeem. From the US side, the units become PFIC holdings from the date you became a US tax resident, so take advice on reporting. Do I need to file Form 8621 if my Indian funds are small? If your total PFIC holdings are $25,000 or less ($50,000 joint) at year end and you had no sale or excess distribution, Part I of Form 8621 is not required. Any year you sell or receive an excess distribution, reporting applies. A CPA familiar with PFICs should confirm your filing position. Are Indian mutual funds PFICs for Canadian residents? No. PFIC is a US tax concept. Canadian residents pay normal capital-gains tax on Indian fund gains when they sell, with half the gain included in income. They must report holdings on Form T1135 once total foreign property cost exceeds C$100,000. Will I be taxed twice on the same gain? Both countries can tax the gain, but the treaties with India let the US or Canada give a foreign tax credit for Indian tax paid. In Canada this usually works well. In the US, PFIC rules can produce a higher tax than India's, so a credit may only partly offset it. Can OCI cardholders in the US invest in Indian mutual funds? Yes. OCI cardholders are treated like NRIs for mutual fund investment and need the same KYC, bank account and declarations. As US citizens, they are always US tax residents, so PFIC rules apply in full. Sources: IRS Instructions for Form 8621 (Rev. 12/2025) (https://www.irs.gov/instructions/i8621) ; IRS: Form 8938 vs FBAR (https://www.irs.gov/businesses/comparison-of-form-8938-and-fbar-requirements) ; CRA: Questions and answers about Form T1135 (https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/information-been-moved/foreign-reporting/questions-answers-about-form-t1135.html) ; PPFAS / Mint (2017): fund houses accepting US and Canada NRIs (https://amc.ppfas.com/media/news/nris-based-in-us-and-canada-can-invest-only-in-a-few-indian-mutual-funds.php) ; Motilal Oswal (2025): AMCs for US/Canada NRIs (https://www.motilaloswal.com/learning-centre/2025/9/mutual-fund-houses-that-allow-usa-canada-nris-to-invest-in-india) ; RBI Master Direction – Deposits and Accounts (https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=10198) . Worked examples are Money n Wealth calculations. Living in the US or Canada and want India exposure? The right route depends on your tax residency, amounts and plans to return. Talk to Money n Wealth (/contact) for a free portfolio review. This article is for general educational purposes only and does not constitute financial advice. Figures and examples are illustrative. Please consult a qualified financial adviser for guidance specific to your situation. Money n Wealth (Predics Fintech Services Pvt Ltd) is an AMFI-registered Mutual Fund Distributor (ARN-121995) and APMI-registered PMS Distributor (APRN07444); it is not a SEBI-registered investment adviser and may earn distribution commission on investments made through it.
