General information only. Not investment, tax or legal advice. Naming a fund category is not a recommendation to buy, hold or sell anything. Prem Tax and Accounting Corp is a CPA firm, not a law firm. Rules differ by country and change often: confirm with the official source or a qualified adviser before you act. Read the full notice. Book a 10-minute call.

Mutual Funds in India

PMS, AIFs and NPS compared with mutual funds

Three Indian products that sit beside mutual funds but follow other rules. We show who may join from abroad, what India taxes and what is still not settled abroad. We recommend nothing.

Prepared by Prem Tax and Accounting Corp. Last checked against official sources on November 5, 2026.

Portfolio management services (PMS), alternative investment funds (AIFs) and the National Pension System (NPS) are not mutual funds. Our Three-Pocket Paper Trail keeps the papers in order.

The short version

PMS: securities held in your own name. Rs 50 lakh minimum, with exceptions. New rules start 1 April 2027.
AIF: a private fund, Rs 1 crore minimum. Since October 2026 SEBI deems people living abroad accredited investors, which waives it.
NPS: a pension account. NRIs and OCIs: Tier I only; FEMA lets the money go abroad.

Slide show: PMS, AIFs and NPS in three slides

PMS
Securities in your name. Rs 50 lakh minimum.
AIFs
A private pooled fund. Rs 1 crore minimum.
NPS
A pension account. Tier I only for NRIs and OCIs.

Side by side

Item	PMS	AIF	NPS	Mutual fund
Regulator	SEBI	SEBI	PFRDA	SEBI
Minimum	Rs 50 lakh; none if accredited	Rs 1 crore; none if accredited	A small yearly minimum	The fund house sets it
From abroad	Yes, like listed shares (our reading)	Persons abroad, except citizens and entities of Pakistan and Bangladesh; SEBI also tests the home regulator	NRIs and OCIs	NRIs and OCIs; some houses refuse U.S. and Canada residents

How India taxes it (FY 2026-27)

FY 2026-27 is tax year 2026-27 in the Income-tax Act, 2025 (1 April 2026 to 31 March 2027). Add 4% cess. Rates change yearly.

Product	How India taxes it
PMS	No PMS-level tax. Our reading: capital gains on shares sold on the exchange. Held over 12 months, 12.5% on gains above Rs 1.25 lakh a year; sooner, 20%. Business income is possible
AIF, Category I and II	Passed through, as if you invested directly; business income is taxed in the fund
AIF, Category III	Taxed in the fund under trustee rules; what investors then pay is not settled
NPS	Up to 60% of the amount paid on closure is exempt. The rest of an 80% lump sum may be taxable: not settled

Abroad: USA, Canada and the UK

Country	What is known	Not settled
USA	PMS shares are tested one by one as possible PFICs. The IRS lists foreign hedge and private equity funds on Form 8938, not the FBAR	AIF: corporation, partnership or trust? NPS: FBAR, Form 8938, trust status
Canada	Shares, fund units and trust interests count for Form T1135 above CAD 100,000 of cost (tax years 2025 and 2026)	AIFs under sections 94 and 94.1; NPS as an exempt pension trust
UK	HMRC's reporting-fund list names some Indian AIF classes	PMS and NPS: no HMRC text found

Our checklist

The Three-Pocket Paper Trail: one folder per product.

PMS: the agreement, demat statement and trade records.
AIF: the placement document, accreditation reply and unit statement.
NPS: the PRAN (permanent retirement account number) statement and contribution dates.
Every pocket: the NRE, NRO or FCNR account used, and written replies on foreign reporting.

Common questions

Can an NRI join a PMS with less than Rs 50 lakh?

Accredited investors are exempt. SEBI's circular of 5 November 2026 deems people living abroad accredited and refers to the PMS rules that start 1 April 2027. The current rules still ask for a certificate, so the position until then is not settled.

Is the whole NPS lump sum tax-free?

Not on the current text. Invented example: from a Rs 50,00,000 corpus, a Rs 40,00,000 lump sum has Rs 30,00,000 exempt (60% of the corpus). The other Rs 10,00,000 may be taxable. Not settled.

Does the IRS exempt NPS from reporting?

Not that we found. Rev. Proc. 2020-17 covers only Forms 3520 and 3520-A and lists no countries; NPS appears not to meet its tests (our reading). See our [Indian CPA page](/indian-cpa/).

Official sources

Keep reading

Please read: general information only

This page gives general information and education about Indian mutual funds and about the tax and reporting rules that may apply to people who hold them. It is not investment, legal, tax, accounting or other professional advice, and it is not a substitute for advice from a qualified adviser, attorney or CPA who knows your facts. Reading it does not create a CPA-client or any other professional relationship with Prem Tax and Accounting Corp. Prem Tax and Accounting Corp is a CPA firm, not a law firm. It does not recommend, rate, sell or manage any mutual fund or other investment, and naming a fund category or product here is not a recommendation to buy, hold or sell it.

Tax and reporting rules differ by country and by person, and they change often: thresholds, rates, forms and deadlines are revised, and agencies, courts and fund companies change how they apply them. We checked the figures against the official sources named on the page on the date shown (last reviewed November 5, 2026), but we do not promise that this page is complete, current or free of errors, and we do not update it the moment a rule changes. Where the rules are unsettled we say so. Fund companies set their own policies on who may invest, and those can change without notice. Past performance does not predict future results, and investments can lose value. Examples are invented and for illustration only.

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Questions about how your Indian funds are reported on a U.S. return? Keshav Agrawal is a U.S. CPA and a Chartered Accountant (CA) from India. We prepare the U.S. side (for example Form 8621, FBAR and Form 8938) and can work alongside your adviser in India, Canada or Europe. We do not sell, rate or recommend any investment. Book a 10-minute call or send us a message.

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