Key takeaways
- NRIs can invest in Indian PMS and AIFs onshore, through NRE or NRO accounts, subject to FEMA and KYC requirements.
- GIFT City funds let NRIs invest in US dollars from an overseas bank account, under a separate regulator (IFSCA) and tax regime.
- Onshore gains are taxed in India, with tax deducted at source; DTAA relief may be available.
- Rupee movements still affect returns from India-focused funds, even when you invest in dollars.
- Your residency, tax position abroad and repatriation needs should decide the route — not the product.
Two routes for NRIs
| Onshore PMS or AIF | GIFT City fund | |
|---|---|---|
| Regulator | SEBI | IFSCA (International Financial Services Centres Authority) |
| Currency | Indian rupees | Usually US dollars |
| Accounts needed | NRE or NRO bank account; demat account for a PMS; KYC | An overseas bank account; the fund’s KYC |
| Typical minimum | ₹50 lakh (PMS); ₹1 crore (AIF) | Typically USD 150,000 for non-retail schemes |
| Indian tax | Taxed in India, with tax deducted at source | Separate IFSC regime with significant exemptions for non-residents |
| Repatriation | NRE: freely repatriable. NRO: within limits, with paperwork | Proceeds paid in US dollars |
Investing onshore: PMS and AIFs through Indian accounts
NRIs can invest in Indian PMS and AIFs much as residents do, with a few additional steps:
- Bank account: investments are made through an NRE (repatriable) or NRO (non-repatriable) account. For a PMS, a Portfolio Investment Scheme (PIS)-enabled account is usually needed to trade listed shares on a repatriable basis.
- Demat and trading accounts: opened in your name for a PMS and designated as NRI accounts.
- KYC: passport, visa or OCI card, overseas address proof, PAN, and FATCA/CRS declarations.
- Restrictions: some managers don’t onboard residents of certain countries, such as the United States and Canada, because of the compliance involved.
The portfolio manager’s or fund’s operations team usually coordinates the account set-up. The products themselves are explained in our PMS and AIF guides, and our page for NRI investment in India sets out the documents and timelines.
Investing through GIFT City
GIFT City (Gujarat International Finance Tec-City), in Gandhinagar, hosts India’s International Financial Services Centre (IFSC). Funds set up there are regulated by IFSCA, usually denominated in US dollars, and designed for global and non-resident investors.
- You can invest in dollars from an overseas bank account, without routing money through NRE or NRO accounts.
- Fund structures include venture capital schemes, restricted (non-retail) schemes and retail schemes; the minimum for restricted schemes is typically USD 150,000.
- Many GIFT City funds invest in Indian listed equities or feed into Indian funds, giving dollar-denominated access to India.
Taxation for NRIs
- Onshore PMS: capital gains are taxed in India at the same rates as for residents, with tax deducted at source; dividends are also subject to TDS.
- Onshore AIFs: Category I and II income is passed through and taxed in your hands; Category III funds are taxed at the fund level.
- GIFT City funds: a separate regime gives non-resident investors significant exemptions on certain income and gains; the detail depends on the fund’s structure.
- Your country of residence: you may owe tax where you live. A DTAA may reduce Indian tax or allow a credit abroad, typically with a Tax Residency Certificate and Form 10F.
US taxpayers should take specialist advice: non-US funds can be treated as passive foreign investment companies (PFICs), which carries punitive US tax treatment. The Indian side is covered in how PMS and AIFs are taxed.
Repatriation
- Investments made from an NRE account, and their proceeds, are generally freely repatriable after tax.
- From an NRO account, you can repatriate up to USD 1 million per financial year, with the required tax documentation (Forms 15CA and 15CB).
- GIFT City funds pay proceeds in dollars to your overseas account.
Which route suits you?
| If you… | Consider |
|---|---|
| already hold rupee savings in NRE or NRO accounts | An onshore PMS or AIF |
| want to invest dollars held abroad without converting them | A GIFT City fund |
| may return to India within a few years | Onshore — holdings continue once your accounts are re-designated |
| want the simplest Indian tax position as a non-resident | A GIFT City fund, subject to advice in your country of residence |
Frequently asked questions
Can NRIs invest in PMS in India?
Yes. NRIs can invest in Indian PMS through NRE or NRO accounts, subject to KYC and FEMA requirements. The minimum is ₹50 lakh, the same as for residents.
Can NRIs invest in AIFs?
Yes. NRIs can invest in Indian AIFs, subject to KYC and FEMA requirements and the same ₹1 crore minimum, or in USD-denominated funds set up in GIFT City.
What is the minimum investment in a GIFT City fund?
For restricted (non-retail) schemes it is typically USD 150,000, though terms vary by fund and investor type.
Do NRIs pay tax in India on PMS gains?
Yes. Capital gains from an onshore PMS are taxable in India, with tax deducted at source. A DTAA may provide relief, depending on your country of residence.
Can US-based NRIs invest in PMS?
Some portfolio managers accept US residents and many do not, because of the compliance involved. US taxpayers should also consider the PFIC rules before investing in non-US funds.
