I am an NRI residing in a Gulf country for over 25 years. I have been investing in Indian mutual funds for the last 4 years.

I would like to know TDS deducted from capital gains (10% for equity funds, 30% for non-equity) can be claimed back.

Ans: Unlike residents, an NRI does not have the option to adjust capital gains against the basic exemption limit of Rs 2.5 lakh. Hence, you cannot claim the TDS.

There are options to avoid double taxation by claiming tax relief if India has signed the Double Taxation Avoidance Treaty (DTAA) with the country of your residency.

 

Ans: Yes, this is on the long-term units of mutual funds the exemption of Rs 1 lakh can be claimed. That is, 10% tax is applicable on long term equity capital gains above 1 lakh

Ans: I'll address your inquiries about TDS and capital gains tax for NRIs selling stocks and redeeming mutual funds:

Stocks (Held for More Than 1 Year):

Taxable: Yes, profits from selling stocks held for over a year are considered long-term capital gains (LTCG) and are taxable in India for NRIs.
TDS: The stock broker will deduct TDS at 10% of the LTCG amount.
Tax Rate: The actual tax liability on LTCG exceeding ?1 lakh (approx. $1,235) is 10% without indexation (inflation adjustment). This means you may be due a refund if your total tax liability is below 10%.
NRE Account: Holding the stocks in your NRE account doesn't affect the taxability.
Mutual Funds:

Tax Treatment: The tax treatment for mutual fund redemptions by NRIs depends on the type of fund:
Equity-Oriented Mutual Funds (Equity & Equity-Linked Savings Schemes):
Short-Term Capital Gains (STCG): Gains from redemptions within 1 year are taxed at 15% with TDS deducted at the same rate.
LTCG: Gains from redemptions after 1 year are taxed at 10% on gains exceeding ?1 lakh, with TDS deducted at 10%.
Debt-Oriented Mutual Funds: Gains are considered income from other sources and taxed at a flat rate of 30% with TDS deducted at the same rate.
Recommendations:

Calculate Your Tax Liability: To determine if you'll owe additional tax or are eligible for a refund, calculate your total LTCG and factor in the TDS deducted.
File an Income Tax Return: Even if your tax liability is less than the TDS deducted, consider filing an Indian income tax return to claim any potential refund.
Consult a Tax Advisor: For personalized advice specific to your situation and to explore potential tax-saving options, consult a qualified tax advisor specializing in NRI taxation.
Additional Notes:

You can claim exemptions under relevant sections of the Income Tax Act (e.g., Section 54EC for reinvestment in specific bonds) to reduce your tax liability.
TDS is a mechanism to collect tax upfront, but it doesn't represent your final tax obligation.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in