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Ramalingam Kalirajan |6971 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on May 10, 2024

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

Question by Narayan on Apr 23, 2024Hindi

Dear Sir / madam , I am an NRI , and having some investments in India. I have question on stocks I have purchased more than 10 years back. Few of them are all high profile company stocks. In case , I I sell now , will it be taxable , I mean TDS will be applied ? It is my NRE account linked to it. Will there be any tax cut ? Same way I have few mutual funds , If I redeem ( after maturity or end of its term) it , will there be any TDS applied before crediting to my account ? Please advise.

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

Asked on - May 20, 2024 | Answered on May 20, 2024

Thank you sir, for explaining my questions very clearly here .

Ans: Welcome :)

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