rewrite this title and make it good for SEOLiving abroad but investing in India? Rules, taxes and key checks NRIs should know about mutual fund SIPs

More Indians are moving overseas for work but continue investing in India to build long-term wealth. Mutual fund SIPs remain a popular choice among these investors, but questions often arise around eligibility, taxation and compliance once residency or citizenship changes.

This is the case of Pavan, a 35-year-old UK-based investor and viewer of The Money Show on ET Now. He has been investing Rs 1 lakh every month through SIPs with a 10% annual increase. Over the years, this disciplined approach has helped him accumulate close to Rs 39 lakh. His long-term goal is to build a retirement corpus of Rs 25 crore over the next 25 years — a target that appears achievable given his current investment pace.

Also Read | Defence mutual funds surge up to 21% since last Budget. What should investors expect in 2026?His current portfolio has got HDFC Flexi Cap Fund where an investment of Rs 50,000 is going now. The other funds in the portfolio are Motilal Oswal Midcap Fund and ICICI Prudential Multi Asset Fund with a SIP of Rs 25,000 each.

As he is living in UK and will be eligible for British passport since June 2026, the investor now want to do his financial planning and want to know certain things such as – can he continue his SIP being a UK citizen, any AMC that do not accept NRI investments, OCI status required or recommended or continuing mutual funds investment in India, and the taxation that will be applicable while making investment and redemption, and lastly, if Indian mutual fund SIP remains optimal for a UK tax perspective or if a partial shift to UK based investment structure.

Target corpus he can achieve

At an assumed annual return of around 12%, corpus accumulated of Rs 39 lakh till now, Rs 1 lakh monthly SIP and 10% step-up annually, the market expert Pankaj Mathpal said that Pavan’s existing SIP strategy alone could potentially grow into a corpus of nearly Rs 46 crore, keeping him comfortably ahead of his goal.

Is the current fund mix adequate?

Mathpal said that the portfolio is spread across flexi-cap, mid-cap and multi-asset funds, which offers reasonable diversification. However, given the long investment horizon, the expert suggests adding a small-cap fund to improve growth potential. Small-cap exposure, when kept within limits, can boost returns over long periods.Smallcap funds Mathpal recommended for investment – Bandhan Smallcap Fund or Nippon India Smallcap Fund.

What happens when citizenship changes?

Now, the other concern Pavan has is whether he will require OCI status once he becomes a UK citizen. As a response to this, Mathpal said that it is non-mandatory.

The expert further added that if he wants to visit India and does not want to apply for a visa every time, so OCI is a good choice, but for investment he does not need OCI as a UK citizen, as a foreign citizen, he is allowed to invest in India in mutual funds.

Which AMCs do not accept NRI investments because there are a few mutual funds who are restricted investments from that particular country. Mathpal said that all AMCs allow investing in mutual fund to the NRIs, only to the citizens of US and Canada there are some limited AMCs who allow, but as far as UK citizenship is concerned, he does not need to worry about, every mutual fund, every fund house allows to invest in mutual funds.

Alternative

The expert further recommends that now the Indian government has started an international financial service centre in Gujarat, Gujarat International Finance Tec-City (known as Gift City), in Gandhi Nagar. So, foreign citizens or NRIs can directly invest in US dollars as well, meaning in that case there is no currency fluctuation. If one is investing in US dollars and when they redeem, they get their money in US dollars only. So, for foreign citizens whether UK, US, or any other country, they are allowed to invest through Gift City in the mutual funds or AIF or PMS which are registered in Gift City, so that is also one good choice for the NRIs or foreign citizens to invest in India now.

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What is the taxation applicable?

Mathpal said that when you redeem your mutual funds in India, that attracts capital gains tax. So, you will have to pay capital gain tax in India if it is taxable because we are talking about 25 years later, so I do not know at that time what rules will exist.

But as of now, the rules are like anybody whether you are Indian resident or you are NRI when you invest in India whatever the capital gains on that, it is taxable. So, in equity up to Rs 1,25,000 is exempted. Amount exceeding Rs 1,25,000 from the equity in long-term that is taxable at 12.5% right now, in future the rate may change also.

How does taxation work for NRIs?

See, because India has a double tax avoidance agreement with the UK, so whatever redemption proceeds are there, whatever the capital gains will be taxable in India, but Pavan will have to report in his country of residence, means in the UK he will have to report it. Now, if the tax rates are higher there, for example, that point in time, so whatever difference he may have to pay that. But he will get credit for the tax that he has paid in India.

So, there is no double taxation, whatever the difference is there in any country or if there is a double tax avoidance agreement between two countries, only difference has to be paid or in case there is no difference, so that investor will pay only in India and will not pay in his country of residence. So, as he is in the UK, I understand that once he is paying tax here and we have the double tax avoidance agreement with the UK, so he will not have to pay tax in his country, I mean in the UK, the expert said.

What is an NRE and NRO account?

Anybody, who is non-resident in India, whether foreign citizen in India wants to open an account here in India or anybody, so they can have two accounts NRE and NRO.

NRE Account – It is basically a non-resident external account. If you invest in a mutual fund through your NRE account, redemption proceeds will also come in the NRE account only. anything you want to transfer from foreign country to India which is earned there, that will also come in an NRE account. So, NRE account is for the money which is earned outside India or otherwise invested from the foreign income in India and then it can come back to that account.

Why is it called NRE?

NRE account, whatever deposit you have can be repatriated freely to the country of residence. If a person has some money here, does not need to declare, they can transfer that money to their country

NRO Account – It is a non-resident ordinary account. when you have income in India, for example, somebody has a residential house which is given on rent. The person was living in India earlier and now moved to another country and the house has been given on rent because the income is in Indian currency here, it will be deposited in NRO account. This account will be only for the income which is generated in India.

For an NRO account, there is a limit and you have to declare it. So, 15CA, 15CB forms have to be submitted. So, you have to declare how much money you are taking from India to your country of residence.

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Should investments be split between India and abroad?

The important thing to keep in mind is that you are doing investment in India but you have a lifestyle that is based out of the UK. If Pavan is accumulating a retirement corpus and the lifestyle over there is definitely different and the currency difference obviously makes it much more expensive. So does he need two portfolios?

The expert said a crucial factor often overlooked is lifestyle and currency. If retirement is planned abroad, expenses will be in foreign currency. Mathpal suggested building parallel portfolios — one in India and another in the country of residence.

Pavan should see that right now it is Rs 25 crore, assuming inflation it will be much lesser than that and then currency difference between Indian rupee and the country means in UK. And more important is that, see, the taxation that time, how that investment performs.

So, every year keep reviewing the portfolio. So, maybe after five years you realise that investing more in India is better or investing in the UK will be better for you. So, a decision can be taken right now, we cannot say with certainty that investing in India will only be better for 25 years. So, the best thing is that right now you have started, continue it, every year keep monitoring your portfolio, your status, and in future you decide what suits you better.

Investing in Indian mutual funds while living abroad is possible and can be rewarding. However, investors must stay aware of compliance requirements, tax rules and currency risks. A well-balanced approach, regular portfolio reviews and geographic diversification can go a long way in ensuring a comfortable retirement, no matter where life takes you.

One should always consider their risk appetite, investment horizon and goals before making any investment decision.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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