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