What happens if I invest in Mutual Funds as an ordinary resident after becoming an NRI?

If you are investing with residential status like an ordinary investor, you are violating FEMA acts.

According to FEMA rules, you have to change your residential status within the specified period in your bank accounts and other investments including mutual funds. As there are different taxation rules for residents and NRIs, you are not allowed to invest freely. If you will be caught violating the Income Tax Act, you have to face penalties.

Since you have an option to continue investing even after changing the status to NRI, it is always better to update the correct residential status for any hassle-free investment.