International mutual funds in India hold over ₹88,000 crores in assets, driven by increasing NRI interest in global diversification. These funds let NRIs invest beyond the domestic market, gaining exposure to major international companies such as Apple , Microsoft , Amazon , and Alphabet (Google) .
This international reach helps hedge against inflation and currency risksWhile NRIs can easily invest in Indian equities through convenient platforms, global mutual funds provide access to growing markets abroad, often improving portfolio stability and long-term returns. This guide will help NRIs understand global mutual funds and select the best options for their financial goals.
What Are Global Mutual Funds?
Global mutual funds are investment vehicles that pool money from investors to buy securities issued by companies worldwide, including the investor’s home country. By investing in one, you gain instant diversification across geographies and industries.
These funds can be structured as open-ended, closed-ended, or exchange-traded funds (ETFs). Depending on the scheme, they may invest in equities, debt, or multi-asset portfolios to lower concentration risks. Global funds offer investors access to growth cycles in different economies,an advantage nearly impossible to achieve through individual stock-picking.
Types of Global Mutual Funds for NRIs
NRIs can invest in a variety of global mutual funds suited to diverse goals and risk levels. Common categories include:
- Aggressive Hybrid Funds: 65–80% in equity and the rest in debt,ideal for long-term investors with higher risk capacity.
- Balanced Hybrid Funds: 40–60% allocation to both equity and debt, auto-adjusted with market changes.
- Conservative Hybrid Funds: 10–25% equity with a majority in debt, designed for steady yet safer growth.
- Multi-Asset Allocation Funds: Invest across equity, debt, and commodities such as gold.
- Emerging Market Funds: Expose investors to fast-growing economies with long-term potential.
For NRIs based in the USA or Canada, certain fund houses have restrictions due to FATCA compliance. However, leading AMCs such as SBI Mutual Fund, ICICI Prudential, and Aditya Birla Sun Life accept investments from US/Canada NRIs with additional disclosures or documentation.
Taxation on Global Mutual Funds for NRIs
Taxation for NRIs investing in mutual funds depends on the fund type and holding period:
Equity Mutual Funds
- Short-term capital gains (STCG), for holdings under 12 months, are taxed at 20%.
- Long-term capital gains (LTCG), for holdings beyond 12 months, are taxed at 12.5%, with an exemption up to ₹1.25 lakh per year.
- Tax Deducted at Source (TDS) applies: 20% for STCG and 12.5% for LTCG above the exemption threshold.
Debt and International Mutual Funds
- Treated as non-equity funds.
- LTCG for units held over 24 months are taxed at 12.5% without indexation.
- STCG is taxed at the investor’s income slab rate.
- TDS is applied at 30% on gains.
International mutual funds focused on non-Indian listed equities follow debt-fund taxation rules rather than equity rules.
NRIs from countries with Double Taxation Avoidance Agreements (DTAA) such as the UAE, Singapore, Oman, and the UK can benefit from tax treaties. If capital gains are only taxable in the country of residence, they may be exempt in India under the DTAA.
How to Choose the Right Global Mutual Fund
Before selecting a fund, clarify your investment objectives and time horizon. Are you aiming for long-term growth or steady returns?
Key factors to evaluate include:
- Performance Track Record: Compare 3-, 5-, and 10-year returns to assess consistent performance.
- Expense Ratios: Higher fees can erode returns over time, so favor cost-efficient funds.
- Fund Manager & AMC Reputation: Opt for managers experienced across global market cycles and AMCs with strong research teams.
- Currency Risk: Exchange-rate fluctuations can impact returns; diversifying across multiple currencies helps mitigate volatility.
- Fund Size & Liquidity: Avoid excessively large or small funds that may face redemption or viability issues.
To begin, NRIs must complete KYC, provide passport, visa, and overseas address proof, and invest via NRE or NRO accounts, depending on whether repatriation of funds is desired.
Conclusion
Global mutual funds offer NRIs exposure to international economies and companies while providing diversification across currencies and market cycles. When thoughtfully incorporated into a portfolio, they can enhance risk-adjusted returns.
Recent tax changes have clarified equity and debt mutual fund taxation, making it important for investors to carefully review holding periods and use Double Taxation Avoidance Agreement (DTAA) benefits where applicable.
Choosing the right fund involves balancing past performance, cost efficiency, and appropriate risk levels. Geographic diversification also helps reduce volatility from any single market or currency.
NRIs can start or streamline their investment journey easily with platforms like iNRI, which simplify KYC and investment processes.
Frequently Asked Questions (FAQs)
Q1. What are global mutual funds and how do they differ from international funds?
Global funds include both domestic and international companies; international funds exclude home-country investments.
Q2. How are global mutual funds taxed for NRIs?
Short-term gains are taxed at 20% for equity funds, while long-term gains are taxed at 12.5% above ₹1.25 lakh; debt/international funds have a 12.5% long-term gain rate.
Q3. What types of global funds are available?
Options include hybrid, multi-asset, and emerging market funds.
Q4. How can NRIs invest in global funds?
Through SIPs or lump sum after completing KYC and linking NRE/NRO accounts; US/Canada NRIs should check for AMC compliance.
Q5. What should NRIs consider before investing in global funds?
Factor in investment goals, risk tolerance, performance, expenses, currency exposure, and AMC reputation.
