Navigating Mutual Fund SIPs: What NRIs Must Know About Rules, Taxes, and Compliance

With India’s mutual fund industry attracting global interest, NRIs investing via SIPs must navigate evolving rules and taxation. While OCI status is not mandatory, investors must comply with KYC norms, FEMA guidelines, and PAN requirements.

Recent tax reforms have reshaped the landscape: short-term capital gains on equity mutual funds now stand at 20% (up from 15%), while long-term gains have risen to 12.5% (from 10%), with the exemption limit increased to ₹1.25 lakh. Additionally, TDS for NRIs is deducted at 20% on equity schemes, making tax planning essential.

Financial experts recommend NRIs review portfolios annually, account for currency fluctuations, and align investments with retirement goals. Proper documentation, including proof of NRI status and bank account details (NRE/NRO), is critical for compliance.

Key Highlights

• Eligibility: NRIs can invest without OCI status; PAN and KYC mandatory.
• Taxation: STCG on equity MFs – 20%; LTCG – 12.5%; exemption up to ₹1.25 lakh.
• TDS: 20% deduction on equity schemes for NRIs.
• Compliance: Investments must follow FEMA rules; NRE/NRO accounts required.
• Best Practices: Annual portfolio review, currency risk assessment, retirement alignment.

Sources: The Economic Times, Nippon India Mutual Fund Tax Reckoner, ET Online Analysis