Almost every family in Dharamshala knows someone working abroad. It used to be rare when I was still in school before 2014 but now it is more common. Back then you would hear one or two people in distance who are working in abroad. But now it is one in every few families.
It could be a young seafarer spending months in the Merchant Navy before coming home on leave. Many students who left for higher studies in Canada, Australia, the UK or the United States are now settled there with work permits or permanent residency. It could be someone from the hotel industry who moved to Dubai, the Maldives or Qatar. Better opportunity, better salary
Even after moving abroad, most people don’t cut their financial ties with home. Maybe it is that Indian thing, to move abroad and still stay fully connected back home.
People who work abroad have parents, who are still living in Dharamshala. Perhaps a house is being built in Kangra. Some are saving to return after retirement, while others simply want a part of their earnings invested in India. That is the time when they have these questions.
“Can I invest in mutual funds while living abroad?”
“Do I need a different bank account?”
“Will I have to pay tax in India?”
“Can I continue the SIP I started before leaving?”
Yes, NRIs can invest in Indian mutual funds.
The rest of the questions aren’t difficult either, but they do have answers that are different from what a resident Indian investor would expect.
Over the last several years, we’ve worked with investors from Dharamshala, Palampur and Kangra who now live across the world. Some are in the Merchant Navy, some work in Gulf countries, and others have settled in places like Canada or maybe Australia. Interestingly, the questions are almost always the same.
This guide brings together the things we find ourselves explaining most often. By the time you reach the end, most probably you’ll know almost everything an NRI needs to understand before starting mutual fund investments in India.
1. Your First Step Is Usually Updating Your Bank Account
Nope, your existing savings account usually isn’t enough now. That might come as surprise to some NRIs.
Once your residential status changes to NRI, your bank account also needs to reflect that change. In most cases, you’ll need an NRE account, an NRO account, or sometimes both.
You can’t simply continue using the same resident bank account and keep investing like before. That’s not how it works.
NRE (Non-Resident External) Account
An NRE account is mainly meant for money earned outside India.
If you’re working in Dubai, sailing in the Merchant Navy, employed in Australia or receiving your salary abroad, this is generally the account where those earnings are parked.
Many NRIs also prefer investing through an NRE account because the money remains freely repatriable. Simply put, if you decide to move those funds back to your country of residence later, both your original investment and the post-tax redemption amount can generally be transferred without any RBI repatriation limit.
NRO (Non-Resident Ordinary) Account
An NRO account serves a different purpose.
It’s used for income that originates in India. Rent from your property, pension, interest from bank deposits or any other Indian income is normally credited here.
Investments made through an NRO account are still allowed, but if you later want to send that money abroad, RBI currently permits repatriation up to USD 1 million per financial year, subject to the prescribed documentation and compliance requirements.
Because both accounts serve different purposes, many NRIs end up maintaining both.
One conversation with a client from Kangra is a good example.
Shubham Rana had been investing with us regularly while working in a hotel in India. A few months later, he called us and randomly mentioned that he is going abroad. He had secured a job on an international cruise line and would soon be leaving India.
The conversation shifted towards increasing his SIP because his income was about to improve.
Before discussing investments, we asked him,
“You must have updated your bank account after becoming NRI, right?”
There was silence for a few seconds. And we have seen this often.
Initially he argued that he doesn’t need it. Because he actually had no idea that this was something he needed to do. Like many people leaving India for the first time, he assumed his existing account and investments would continue exactly as they were.
So we put the SIP discussion on hold.
First, we helped him understand the difference between NRE and NRO accounts, shared a checklist of the banking formalities he needed to complete, and only after his banking setup was updated did we transition his investments to an NRI-compliant structure. Since this was the bank field, we could only guide him through it, he had to go to the bank and get the process done on his own.
It delayed the SIP increase for a while but,
That was still far better than discovering the issue months later and having to untangle everything after he’d already started working overseas.
2. NRIs Need a Few Additional Documents Before Investing
People who are already investing in mutual funds while living in India, get irritated when they come to know of the extra few formalities of NRI investing. But that is what we have to deal with.
But these the aren’t documents you’ll have to submit every year. Most of them are collected when your KYC is being completed or updated. Once that’s done, future investments become much simpler.
Along with your PAN and identity proof, you’ll normally be asked for documents such as:
- Passport
- Overseas address proof
- Visa, CDC (for seafarers) or residence permit, wherever applicable
- FATCA/CRS self-declaration
- Tax Identification Number (TIN) or the equivalent tax number issued by your country of residence
- Details of your tax residency
Very common for us to hear from the client “why do I have to go through this process again when I have already done this once before”
Once you become an NRI, mutual fund companies have additional reporting responsibilities under international tax regulations. They need to know which country you pay taxes in and confirm certain declarations before they can onboard you as an investor.
Most of these documents are easy to arrange.
The delay usually happens because people don’t know they will be asked for them. We’ve had investors who came home to Dharamshala for just two weeks, hoping to finish all their financial work before flying back. The investment itself wasn’t the problem. Waiting for one missing document from overseas was.
That’s why we usually tell clients to keep soft copies of these documents ready even before we begin the paperwork. It saves a surprising amount of time, especially if your return flight is already booked.
One thing worth mentioning for Merchant Navy professionals is the CDC (Continuous Discharge Certificate). Depending on the AMC and KYC requirements, this is often accepted as supporting proof of your overseas employment. We don’t have the exact number but the number of seafarers in Dharamshala is reasonable, that’s why this comes up more often here than it probably does in many other parts of the country.
After submitting these formalities, investor doesn’t have to go through this process again unless there is a change in your residential status or KYC details.
3. Choosing the Right Mutual Fund Becomes Slightly More Complicated
It can come as surprise but some Asset Management Companies (AMCs) do not accept investments from NRIs. As of writing this article, Angel One Mutual Fund, Canara Robeco Mutual Fund and Invesco Mutual Fund, do not allow NRI investments. Although these policies can change over time.
The restrictions become even tighter if you’re living in the United States or Canada.
Several AMCs either don’t accept investments from residents of these countries or require additional offline documentation because of regulatory requirements like FATCA. A portfolio that is perfectly suitable for a resident Indian may simply not be available to someone living in Toronto or New York.
This is where many investors get caught by surprise.
They spend time researching funds, comparing returns and deciding on a portfolio, only to realise later that one or two of their preferred fund houses won’t onboard them.
We came across a very similar situation when Rahul got in touch with us.
He has been working in Canada, and he has been investing with Steadrow capitals for quite some time, but this time he was reaching out because one of his friends wanted to start investing in mutual funds who works with him but happens to be home. They had already shortlisted few AMCs because it was a familiar name.
As we told them, Currently, Few AMCs requires an offline onboarding process for certain NRIs from the US and Canada.
Instead of asking him to compromise on his financial goals or go through an inconvenient process, we looked at the AMCs that supported digital onboarding for his category and built the portfolio from that universe instead. It was clear that he would have liked to have funds from preferred AMCs more but his situation did not allow it so there was not much we can do in that regard.
The objective stayed the same but with different AMCs
That experience taught him something many NRIs discover only after they begin investing.
As an NRI, before finalising any investment plan, it’s always worth checking whether the AMC accepts investors from your country of residence.
4. TDS Works Differently for NRIs
This is probably one of the most common questions we receive from NRI investors after their first redemption.
A resident Indian investor redeems mutual funds worth ₹5 lakh.
If there is no exit load, the full redemption amount usually reaches the bank account. Any applicable tax is then calculated and paid while filing the income tax return.
For NRIs, the process works differently.
Tax Deducted at Source (TDS) is generally deducted by the mutual fund house before the redemption amount is credited to the investor’s account.
One of our investors, Ravindra has been investing with us for several years.
He works in the hospitality industry in Dubai and he redeemed a small portion of his investments while he was back home in Dari, Dharamshala. Since there was no exit load, he expected the complete redemption amount to be credited to his account.
However, the amount received was lower.
His first thought was that something had gone wrong with the redemption process.
He asked us. Perhaps thinking he got charged for something. After checking the transaction details, we explained that the difference was because of TDS deducted as per the applicable rules for NRI investors. We also helped him understand how the deduction would reflect in his tax records and which documents he should keep for filing his return.
We did not really solve anything for him but just gave him a little clarity about what exactly happened.
For resident investors, this situation usually does not come up.
For NRIs, it is a normal part of the process.
5. Double Taxation Can Sometimes Be Reduced
Many countries have a Double Taxation Avoidance Agreement (DTAA) with India.
Depending on your country of residence and the applicable treaty, you may be eligible for certain tax benefits.
To claim these benefits, investors generally need documents like a Tax Residency Certificate (TRC) issued by the tax authorities of their country of residence, along with other declarations required by the mutual fund house or tax authorities.
The rules are different for every country.
A benefit available to an NRI living in one country may not apply to someone living in another. This is why it is better to understand the applicable rules before assuming how taxation will work.
Going into full details of taxation is beyond the scope of this article. For specific tax decisions, consulting a qualified tax professional is always recommended.
6. Understand Repatriation Before You Invest
Many NRIs know that they can invest in Indian mutual funds.
What is less understood is how the money comes back when they eventually redeem their investments.
The answer depends mainly on the bank account used for investing.
If the investment was made through an NRE account, both the principal amount and eligible post-tax proceeds are generally freely repatriable.
If the investment was made through an NRO account, repatriation is governed by RBI regulations and is currently subject to an overall limit of USD 1 million per financial year after completing the required compliance process.
Neither option is better than the other.
They are meant for different situations.
7. Your Demat Account May Also Need Attention
Some investors prefer holding mutual funds in demat form instead of directly with the mutual fund company through Statement of Account (SOA) format.
If you become an NRI after already holding investments through a resident demat account, the account generally cannot continue in the same form.
It usually needs to be closed or converted into an NRI demat account through your depository participant.
Many investors focus only on changing their bank account details and miss this part.
8. Sometimes Investing Through a Parent Makes More Practical Sense
Every NRI family has a different situation.
For some NRIs, especially those working in the merchant navy or on cruise ships, managing investments personally can become difficult. Internet availability, changing locations and OTP access can create practical problems.
One such discussion happened with Pankaj, a merchant navy officer.
This might sound like a unique case but actually is very common for people in Kangra at least. Every month, he sent money home to support his parents. After their household expenses, a significant amount remained unused in their savings account.
Instead of creating a process that depended on him receiving OTPs while sailing across different time zones, when he approached steadrow capitals, we explored another possibility.
Since the money was already being gifted to his father, one option was to invest that amount in his father’s own mutual fund portfolio.
From a tax perspective, genuine gifts to parents are not taxable. Income generated from investments made by the father would generally be taxed in the father’s hands. The gains, however, remain taxable whenever the mutual fund units are redeemed.
The discussion was not only about taxation.
It was also about ownership, trust, family circumstances and making sure everyone clearly understood who legally owned the investments. We are well aware that not every family will have that same level of shared financial openness and we don’t expect it to be that. But if you have, then why not take advantage of it.
Families in Dharamshala often have strong family connections with each other, so arrangements like this can work well in the right situations.
However, it should never be copied simply because it worked for someone else. Every family has different circumstances, and such decisions should be taken after proper discussion.
A Simple Checklist Before You Start Investing as an NRI
Before making your first investment, check whether these basics are completed:
- Have you converted your resident banking relationship into the appropriate NRE and/or NRO account?
- Is your PAN linked correctly?
- Have you completed FATCA and CRS declarations?
- Do you have your Tax Identification Number (TIN) ready?
- Have you updated your KYC with your overseas address?
- Does your preferred mutual fund accept investors from your country of residence?
- If you invest through demat, has your account been converted to NRI status where required?
- Have you understood how TDS and repatriation will apply to your investments?
Most of these are one-time formalities.
Once these are completed, investing in Indian mutual funds is usually not very different from investing while living in India.
The bigger problem is not that the process is impossible to understand. The problem is that many investors are unaware of these additional steps until they face an issue.
For many NRIs from Dharamshala, whether they are sailing across oceans, working in Gulf hotels, or building careers in United States, getting these details right at the beginning can save a lot of confusion later.
Final Thoughts
An NRI investing in Indian mutual funds does not just need to understand returns.
They also need clarity on account types, taxation, documentation, repatriation rules and the practical challenges of managing investments from another country.
This article covers almost everything an NRI investor needs to know before starting mutual fund investments in India.
At Steadrow Capitals, we have been helping investors manage these processes since 2016, from completing the required formalities to handling investments and keeping track of important details throughout the journey.
For NRIs who want to invest in India while staying away from home, having someone familiar with both the investment process and the practical challenges of NRI formalities can make the experience much simpler. Connect with Steadrow Capitals to understand how your NRI investment journey can be structured.
Frequently Asked Questions About NRI Investments in Dharamshala
Can NRI invest in Mutual funds and SIP in India ?
Yes. NRIs can invest in mutual funds and SIPs in India. However, there are some additional formalities depending on your country of residence.
Can an NRI continue their existing SIP after moving abroad?
Yes, an NRI can generally continue mutual fund investments after changing residential status, but the investor needs to update their KYC, bank account details and other required information according to applicable regulations.
Can a Merchant Navy officer invest in mutual funds while sailing abroad?
Yes, Merchant Navy professionals can invest in Indian mutual funds, but they should ensure that their banking details, KYC documents, overseas address and tax residency information are properly updated.
Can an NRI living abroad invest in Indian mutual funds without visiting India?
At steadrow capitals, we do not require the physical presence for the NRIs to start investing. However, your digital availability is needed to complete the process.
Do NRIs have to pay tax in India on mutual fund profits?
Yes, NRIs must pay tax on mutual fund profits earned in India. Profits are taxed as capital gains when units are sold. Asset management companies deduct TDS at the time of redemption.
Where can NRIs get guidance for investment in Dharamshala ?
NRI investors in Dharamshala and Kangra can connect with Steadrow Capitals for detailed planning of their investments.
Disclaimer: The details shared in this article are intended strictly for educational and informational purposes and should not be construed as financial, legal, or investment advice. Mutual fund investments carry inherent market risks; please review all scheme-related documents thoroughly before committing capital. Mutual fund investments made through a mutual fund distributor are generally through Regular Plans, where the distributor may receive commission from the AMC. Investors should understand the applicable costs and the difference between Regular and Direct Plans before investing. The details provided are compiled entirely at the discretion of the owner, reflecting general market consensus and available public data. This article does not hold the author, owner, or any affiliated parties financially or legally liable for your investment choices or potential losses. Past performance of any Asset Management Company (AMC) or specific fund does not guarantee future results. Investors are strongly encouraged to consult a certified financial advisor or wealth distributor to assess their unique financial objectives and risk appetite prior to investing.
Holding the NISM Series V-A certification, Himanshu is a Partner at Steadrow Capitals. Backed by over ten years of equity market experience, he helps investors make informed financial decisions utilizing strictly goal-oriented strategies.