FATCA and US/Canada NRI mutual fund investing — the real restrictions
Most AMCs refuse US/Canada NRIs. A handful accept with extra paperwork. Here's the workaround menu and what actually works in 2026.
If you're an NRI in the US or Canada and tried to start an Indian SIP, you've probably hit a wall. "Sorry, we don't accept investments from US/Canada residents." That's FATCA. Here's why it exists, which AMCs still accept you, and what to do.
What FATCA actually is
Foreign Account Tax Compliance Act, signed by the US in 2010. It forces foreign financial institutions to report US persons' accounts directly to the IRS. India signed an Inter-Governmental Agreement (IGA) in 2015. Canada has CRS (similar mechanism).
Indian AMCs must therefore (a) identify all US/Canada-resident investors, (b) collect detailed FATCA declarations, (c) submit annual reports to IRS via Indian tax department, (d) deal with US securities law if they accept new US investments.
Most AMCs decided the compliance cost > benefit. They simply refuse new US/Canada NRI investments.
AMCs that DO accept US/Canada NRIs (2026)
Confirmed accepting, with extra paperwork:
- Aditya Birla Sun Life MF
- ICICI Prudential MF
- Nippon India MF (formerly Reliance)
- L&T MF (now HSBC)
- UTI MF (selected schemes only)
- Sundaram MF
- PPFAS / Parag Parikh MF
- Tata MF
AMCs that explicitly refuse (as of 2026): SBI MF, HDFC MF, Axis MF, Kotak MF, Mirae Asset, Motilal Oswal, Quant. Check directly with the AMC before you commit — list changes.
The extra paperwork US/Canada NRIs face
- FATCA declaration form — confirms you're a US/Canada person, gives SSN/SIN, agrees to share data with IRS/CRA
- Physical KYC in some cases (in-person verification at AMC office or Indian consulate)
- NRO/NRE bank account in India is mandatory — funding from foreign accounts directly is rarely allowed
- PAN — issued / linked to NRI status
- Self-attested copies of passport, visa, foreign address proof, US/Canada tax ID
The platforms that smooth this
- MF Central (CAMS + KFintech joint platform) — allows NRIs to manage all SIPs across AMCs once onboarded
- Kuvera NRI — handles US/Canada NRIs for the supported AMCs
- Groww NRI — partial support, not all AMCs available
- Direct AMC websites — each AMC has its own NRI portal with FATCA declarations
Tax implications you must plan for
Indian mutual funds are PFICs (Passive Foreign Investment Companies) under US tax law. PFIC tax is brutal:
- Mark-to-market election: tax annual gains as ordinary income (35% bracket)
- Or: "excess distribution" rules with interest charges that can hit 50%+ effective rate
- Form 8621 required for each PFIC each year
The math often kills the case: 12% Indian MF return becomes 6–7% after PFIC tax. Beware before going deep.
Workarounds for US/Canada NRIs
1. ETFs traded on US exchanges (FN-Indian indices)
INDA (iShares MSCI India), INDY (iShares India 50), SMIN (iShares MSCI India Small-Cap). Bought on US brokerage = no PFIC, normal capital gains tax. Limited to large-cap index exposure.
2. Direct stocks via PIS account
Indian stocks are not PFICs (active companies). Buy direct via Zerodha NRI / ICICIDirect NRI. Pay full Indian capital gains + report on Schedule D in US filing.
3. NRE FDs
Tax-free in India, fully repatriable. US still taxes the interest as global income. Still simplest for short-term parking.
4. NPS (Tier 1)
NRI NPS is allowed. PFIC question is open — consult a CPA familiar with Indian retirement schemes.
5. Gold ETFs / SGB
Gold ETFs are PFICs (same problem). SGB is Indian sovereign debt — typically taxed as interest, not PFIC. Easier for US compliance.
Returning to India — what becomes of US-bought funds?
Once you're tax-resident in India again: PFIC status disappears. Indian MFs become normal investments. Many NRIs hold their Indian MFs through US years (paying PFIC tax) and continue happily after return.
The pragmatic plan
- Use NRE FDs for guaranteed yield — tax-free in India, simple in US
- Use US-listed India ETFs (INDA / INDY) for index exposure — no PFIC headache
- If you must do Indian MFs: stick to one or two AMCs, run mark-to-market PFIC election, factor in the 35% drag
- Real estate continues to work — not a PFIC
FAQs
I had Indian MFs before moving to the US — can I keep them?
Yes, existing investments are grandfathered. You can hold, redeem, switch — but they're now PFICs in your US tax filing. New SIPs may be blocked.
Does FATCA apply to Green Card holders?
Yes. US tax residency = anyone with citizenship, Green Card, or who passes substantial presence test. All trigger PFIC.
What about Canadian NRIs — same rules?
Canada has CRS (similar disclosure regime). Canadian tax has its own FAPI rules — generally less punitive than US PFIC, but still complex.
Is INDA a PFIC?
No. INDA is a US-domiciled ETF (iShares trust), not a foreign fund. Treated as normal stock for US tax. That's why it's the cleanest India exposure for US persons.
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