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Ramalingam Kalirajan |10872 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Sep 17, 2025

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Asked by Anonymous - Jul 28, 2025Hindi

Hello sir, I am currently working in Oman. I am an Indian citizen, I am investing Rs. 8 lakhs in equity market and Rs. 5000 per month in mutual funds through grow app from 2023. I need to know whether I will have to pay any kind of tax. I have not sold it yet, I am keeping it for the long time.

Ans: It is good that you have started early.
Investing in equity and mutual funds shows long-term vision.

Your decision to stay invested without panic is also wise.
Let us review the tax aspects in detail from all sides.

» Your Residential Status Matters for Tax

– You are an Indian citizen but staying in Oman.
– For tax in India, residential status is key.
– If you stay outside India for 182 days or more in a year, you are an NRI.
– NRIs are taxed only on income earned or received in India.
– So capital gains from Indian investments are taxable in India.

– Salary earned in Oman is not taxable in India.
– But income from Indian mutual funds or shares is taxable.
– Even if you do not sell, tracking tax impact helps in future planning.

» No Tax is Due Until You Sell the Investment

– You said you have not sold any mutual fund or equity yet.
– That means you have no capital gains realised.
– Tax is only on realised gains, not on holding value.
– So for now, there is no tax due.

– Just holding the investment doesn’t create tax liability.
– But keep a record of your purchase price and date.
– It will help when you decide to sell later.

» Tax on Equity Mutual Funds and Shares

– If you hold equity mutual funds or shares for over one year, it is long term.
– Gains above Rs. 1.25 lakh in a year are taxed at 12.5%.
– Gains below Rs. 1.25 lakh in a year are tax-free.
– For short-term gains (sold within 1 year), tax is 20%.

– This rule applies even to NRIs investing in Indian equity.
– Tax is deducted only when you redeem your investment.

– For now, since you have not sold, there is no capital gain.
– But plan the exit carefully when you redeem later.
– Consider selling in parts to stay within exemption limit.

» Tax on Debt Mutual Funds for NRIs

– If any of your mutual funds are debt-oriented, tax is different.
– There is no benefit of long-term tax rate.
– Whether short-term or long-term, gains are taxed as per your slab.
– As an NRI, your slab is not relevant since tax is deducted at source (TDS).

– For debt funds, plan your redemption timing well.
– Use them only for fixed goals or short-term needs.

» Mutual Fund TDS Rules for NRIs

– For NRIs, mutual fund companies deduct TDS on capital gains.
– TDS is 20% for short-term equity gains.
– TDS is 12.5% on long-term equity gains above Rs. 1.25 lakh.
– For debt mutual funds, TDS is as per slab rate.

– Even if actual tax is lower, TDS may be higher.
– You may have to file tax return to claim refund.
– Filing return helps in getting extra TDS back.

» Grow App is a Direct Platform – Caution Advised

– You are investing through Grow App which gives direct plans.
– Direct plans do not involve guidance from Certified Financial Planner.
– Fund selection, portfolio rebalancing, and risk planning is your job.

– Many investors follow star ratings blindly.
– But past returns are not future guarantees.
– Mistakes in direct funds can reduce long-term returns.

– Instead, invest through regular plans with CFP support.
– You get guidance, review, and personalised fund choice.
– It also helps in exit planning and tax-efficient switching.

– Avoid direct investing without expert guidance.
– Better pay a small commission than take costly decisions.

» Index Funds Should Be Avoided

– Some direct platforms push index funds.
– Index funds copy the market and offer no active risk control.
– They fall heavily during market corrections.

– During COVID fall, index funds dropped more than some active funds.
– There is no fund manager protection in index funds.
– For long-term wealth, active funds give better upside.
– Also, better downside protection during crashes.

– Since you are investing for the long term, go for active mutual funds.
– Choose 4–5 funds across categories with CFP advice.

» Currency Impact is Not Taxed

– You invest in rupees but earn in Omani Rial.
– Currency conversion gains are not taxed.
– Only the capital gain from fund or equity sale is taxed.

– But when you repatriate money to Oman, check FEMA rules.
– You can freely send money abroad from NRE or FCNR accounts.
– Don’t use savings account in India for repatriation.
– Use NRE or NRO accounts for Indian investment transactions.

» Maintain Proper Investment Records

– Keep all fund statements and purchase dates safe.
– Note down your folio numbers and scheme names.
– Keep contract notes for equity share purchases.

– When you sell later, you need this data for capital gain calculation.
– This helps in accurate tax filing and audit-proof planning.

– NRIs also need Form 10F and TRC if claiming DTAA benefits.
– This helps avoid double taxation between Oman and India.

» Your Investment Approach is Right

– Rs. 8 lakhs lump sum in equity is fine.
– Rs. 5,000 SIP is a strong long-term habit.
– Make SIPs step-up yearly to build bigger wealth.

– Avoid over-diversifying.
– 4 to 5 quality mutual funds are enough.
– Don’t chase high short-term returns.

– Stay consistent and keep investing.
– Review every 6 to 12 months with a CFP.

– Avoid investing in insurance products with returns.
– ULIPs and endowment plans are not suitable for NRIs.
– They offer poor flexibility and low value.

» Reinvest Dividends, Avoid Payout Mode

– Always choose growth or accumulation option in mutual funds.
– Dividend options give taxable payouts and reduce compounding.
– As an NRI, dividend income is also taxable.
– Dividend is added to income and taxed at slab rate.

– Let your fund grow inside without withdrawals.
– Reinvest to get compounding benefit.

» Finally

– Since you have not sold, there is no tax yet.
– Tax arises only when you redeem.
– For now, keep investing and stay patient.

– When you sell later, long-term gains above Rs. 1.25 lakh are taxed at 12.5%.
– Short-term equity gains are taxed at 20%.
– For debt funds, entire gain is taxed as per slab.

– Direct fund investing through Grow may not suit all investors.
– Without guidance, mistakes can reduce your long-term wealth.

– Switch to regular plans with a Certified Financial Planner’s help.
– They guide on selection, taxes, withdrawals, and reviews.
– Active mutual funds offer better returns and protection than index funds.

– Keep SIPs running and track your portfolio yearly.
– Align funds to long-term goals.
– Focus on 3 to 5 funds with strong consistency.

– Avoid NFOs, fancy themes, and direct equity trading.
– Build wealth slowly and steadily.
– Repatriate money through proper NRE/NRO route only.

– Maintain full records and be tax-compliant in India.
– File return only if tax is deducted or gain is realised.
– Use help from CFP when filing or exiting investment.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

https://www.youtube.com/@HolisticInvestment

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