Non-Resident Indians looking to invest back home often find the first hurdle isn't choosing what to invest in — it's understanding the account structure and compliance steps required before they can invest at all. Here's a straightforward walkthrough of what NRIs need in place before investing in mutual funds, PMS, or equities in India.
Setting Up the Right Bank Accounts
NRIs need either an NRE (Non-Resident External) or NRO (Non-Resident Ordinary) account to invest in Indian markets — a regular resident savings account cannot be used once residency status changes. An NRE account holds foreign earnings remitted to India and is fully repatriable, with both principal and interest freely transferable abroad. An NRO account is meant for income earned within India — rent, dividends, or pension — and while it can be used to invest, repatriation of funds from it is subject to limits and requires additional documentation.
Completing KYC as an NRI
KYC (Know Your Customer) for NRIs requires a few additional documents compared to resident investors: a valid passport, overseas address proof, PIO/OCI card if applicable, and PAN card. Some fund houses also require an in-person verification, which can often be completed at an Indian embassy, consulate, or through a video KYC process depending on the country of residence. Getting KYC right upfront avoids delays later when placing investment transactions.
What NRIs Can Invest In
- Mutual Funds — Most AMCs accept NRI investments, barring a few restricted for residents of certain countries due to regulatory reasons (such as the US and Canada, where additional compliance applies).
- Portfolio Management Services (PMS) — Available to NRIs through an NRE/NRO-linked demat and trading account, subject to the same minimum investment norms as resident investors.
- Direct Equities — NRIs invest through the Portfolio Investment Scheme (PIS) route via a designated bank, which tracks and reports transactions to the RBI.
- Alternative Investment Funds (AIF) — Open to NRIs, subject to FEMA regulations and the fund's specific eligibility norms.
Taxation Basics to Keep in Mind
Capital gains on Indian investments are taxable in India regardless of residency status, with TDS typically deducted at source for NRI investors. Depending on the Double Taxation Avoidance Agreement (DTAA) between India and the country of residence, NRIs may be able to claim credit for taxes paid in India against their tax liability abroad — a Tax Residency Certificate is usually required to claim DTAA benefits.
Getting Started
Once the NRE/NRO account, KYC, and (if investing in direct equities) the PIS approval are in place, the investment process itself mirrors that of resident investors. Given the additional compliance layer, working with an advisor familiar with NRI regulations can help avoid common documentation delays and ensure the account structure matches the investor's repatriation needs.