The short answer
Yes, but with fewer choices and more paperwork than NRIs elsewhere. Many Indian fund houses don’t accept investments from people living in the US or Canada. Several large ones do, usually with extra conditions.
If you live in the US, there’s something that matters even more than the paperwork: how the US taxes Indian mutual funds. It can take away much of the benefit, so it’s worth understanding before you invest.
Why US and Canada NRIs face extra hurdles
It comes down to reporting rules. The US has a law called FATCA that requires financial institutions around the world, including Indian fund houses, to report investments held by US taxpayers. Canada has similar reporting requirements, along with its own securities rules.
For a fund house, following these rules means extra checks, systems and legal costs. Some decided it wasn’t worth it and stopped accepting investors from these two countries. Others accept them, but ask for more.
What “extra conditions” usually means
The rules differ from one fund house to another and change from time to time, but they commonly include:
- Paper applications only, rather than online investing.
- A signed declaration confirming your country of residence and tax status.
- Restrictions on how you invest, such as allowing only certain types of accounts, or only one-time investments rather than SIPs.
- Occasionally, investing only while you’re physically in India.
Because these policies change without much notice, always confirm the current rules with the fund house, or with someone who tracks them, before you invest.
US and Canada are not the same
| Living in the US | Living in Canada | |
|---|---|---|
| Can you invest? | Yes, with fund houses that accept US investors | Yes, with fund houses that accept Canadian investors |
| Tax in India | Deducted when you redeem | Deducted when you redeem |
| Tax at home | Can be complicated and costly, because of special rules for foreign funds | Generally taxed like other foreign investments, with credit for Indian tax paid |
| Our honest view | Speak to a US tax professional first | Usually workable, with good record-keeping |
The US tax issue, in plain words
The US treats most non-US mutual funds, including Indian ones, as a special category called a Passive Foreign Investment Company (PFIC). Investments in this category get unusually harsh US tax treatment: gains can be taxed at high rates, sometimes with interest charges, and each fund you hold may need its own detailed annual tax form.
In practice, this often means higher tax, higher accountant fees, and a lot of paperwork, which can wipe out much of the benefit of investing in India this way. It applies to US citizens, green card holders, and most people living in the US on work visas, since they’re generally treated as US tax residents.
We’re not US tax experts, and the right answer depends on your situation. But we’d rather tell you about this up front than have you find out from your accountant after you’ve invested.
For NRIs in Canada
Canada doesn’t have an equivalent of the US rules. Gains from Indian mutual funds are generally taxed in Canada like other foreign investments, and the tax treaty between India and Canada lets you claim credit for tax already deducted in India, so you’re not taxed twice on the same gain. If the total cost of your foreign investments goes above C$100,000, you’ll need to report them to the Canada Revenue Agency each year. Keep your statements and transaction records organised.
What we’d usually suggest
If you live in the US, speak to a US tax professional who understands PFIC rules before you invest in Indian mutual funds. Depending on your situation, simpler routes to India’s growth may exist, such as India-focused funds listed in the US. We don’t earn anything from those, but if they’re the better fit for you, that’s the honest answer.
If you live in Canada, investing in Indian mutual funds is usually practical. Choose a fund house that currently accepts Canadian investors, be ready for paper forms, and keep good records for your Canadian tax return.
If you already hold Indian funds and you’re moving to the US or Canada, update your residential status and tax details with your fund houses. You may not be able to invest more with some of them, but you can usually stay invested or redeem as normal. Don’t let the move rush you into selling. Look at the tax on both sides first.
When it’s different
- You’re moving back to India soon. Once you’re a resident again, these restrictions no longer apply. It may be simpler to wait.
- You’re in the US only briefly. Whether you count as a US tax resident depends on how long you’ve been there. Check before assuming either way.
- You want to support family in India. Sometimes it’s simpler for a family member who lives in India to invest from their own account, with money you send them. There are gifting and tax considerations on both sides, so plan it properly.
CurateMyMoney is an AMFI-registered mutual fund distributor (ARN-184811). Mutual fund investments are subject to market risks. Read all scheme-related documents carefully. Tax rules mentioned are as applicable at the time of writing and may change; please check the current rules or consult a tax professional before acting.
