NRIs can invest in Specialised Investment Funds (SIFs), but how the investment is funded affects how easily the money can later go back abroad. Choosing a SIF for NRIs means working within two sets of rules: SEBI’s SIF regulations and India’s foreign exchange law, FEMA.
Most NRIs are eligible, though acceptance also depends on the fund house and the investor’s country of residence. Here is how eligibility, FEMA rules, investing and redemption work.
Can NRIs Invest in SIFs in India?
Every SIF strategy is legally a mutual fund scheme, so NRIs and Overseas Citizens of India (OCIs) can generally invest in SIFs as they do in mutual funds. Eligibility can still differ by strategy, so it is worth checking the Investment Strategy Information Document (ISID) first.
The ₹10 lakh minimum applies to NRIs just as it does to residents, counted at PAN level across all strategies of the same SIF, while accredited investors are exempt from it. Since NRIs usually buy SIF units from the fund house rather than on a stock exchange, they also do not need a PIS account.
NRI status under FEMA depends on why and for how long someone lives abroad, while tax residency is decided separately under the Income-tax Act, mainly by days spent in India, so the two can differ.
FEMA Rules for NRI Investments in SIFs
FEMA treats mutual fund units according to how much the fund holds in equity. Funds investing more than 50% in equity fall under the Non-Debt Instruments Rules, 2019, and the rest under the Debt Instruments Regulations, 2019.
Both allow NRIs to invest on either a repatriable or a non-repatriable basis.
(Source: RBI, FEMA Debt Instruments Regulations, 2019, and High Commission of India, Ottawa)
| Repatriable basis | Non-repatriable basis | |
| Paid from | NRE or FCNR(B) account, or money remitted from abroad | NRO account, though NRE or FCNR(B) funds can also be used |
| Redemption proceeds | Can be sent abroad or credited to an NRE, FCNR(B) or NRO account | Credited to the NRO account |
| Moving the money abroad | After tax, through the bank’s usual process | Up to USD 1 million a financial year from the NRO account, with Forms 145 and 146 where required |
NRIs who plan to take the money back abroad should invest from an NRE or FCNR(B) account, or with money sent from abroad. This lets the investment be held on a repatriable basis, so the redemption money can go back abroad without counting towards the USD 1 million NRO limit.
SIF Eligibility for NRIs in the US and Canada
SEBI does not bar NRIs living in the US or Canada, but some fund houses do not accept their investments because of the extra reporting and securities-law obligations those countries bring. Each strategy’s ISID states whether it accepts them.
US-based NRIs should also check how US tax rules treat Indian funds, as these can add to the cost of holding them.
Read Further: What Is a Specialised Investment Fund (SIF)?
How NRIs Can Invest in Specialised Investment Funds
The process starts with KYC that records NRI status, using a PAN, passport, overseas address proof and a FATCA and CRS declaration. Existing mutual fund investors should check that their KYC was updated after they moved abroad.
Payment must come from the investor’s own account, as fund houses do not accept third-party payments. Investments can be made directly or through an AMFI-registered distributor holding the NISM certification required for SIFs.
Also Read: How to Invest in a SIF Through a Certified Distributor
How SIF Gains Are Taxed for NRIs
NRIs pay tax on SIF gains under the same rules as residents, but unlike residents, they have tax deducted at source when they redeem. It is deducted on the gain, not the full redemption amount.
For equity-oriented strategies, TDS is 20% on short-term gains and 12.5% on long-term gains, with the ₹1.25 lakh annual exemption applied either at source or through the tax return. Long-term gains from other strategies also attract 12.5%.
Debt-oriented gains and short-term gains from other strategies are taxed at slab rates, but TDS is deducted at the top rate of 30%. IDCW payouts attract 20% TDS, and all these rates are before surcharge and cess.
(Source: Income-tax Act, 2025, section 393)
NRIs in a country that has a tax treaty with India may pay less by giving the fund house a Tax Residency Certificate and Form 41 (earlier Form 10F) before redeeming. Since TDS is not always the final tax, any excess can be claimed back through an Indian income tax return.
How NRIs Can Redeem SIF Units and Repatriate the Money
Redemption proceeds are paid after TDS into the account that matches the investment’s basis. For transfers abroad from the NRO account, the bank can confirm whether Forms 145 and 146 (earlier Forms 15CA and 15CB) are needed.
The ₹10 lakh minimum applies at exit too, so a redemption that takes the holding below it freezes all units across the SIF’s strategies, which are redeemed in full unless the holding is restored within 30 calendar days. A fall caused only by market movement does not trigger this freeze, though the investor can then only exit in full.
Getting the Structure Right Before Investing
Before investing, confirm the ISID’s eligibility terms, the account the money will come from and the treaty documents needed at redemption. As FEMA and tax rules can change, a tax adviser familiar with cross-border investing should confirm the treatment for your situation.
Disclaimer: Content on all platforms of Moat Wealth Associates LLP is for educational/ informational purposes only. The materials/information on this website are for information, financial literacy and educational purposes only. Moat Wealth Associates LLP is not a SEBI-registered IA.
