Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
Equity versus debt funds
For equity funds, gains on units held 12 months or less are short-term, taxed at 20% (from 23 July 2024); gains on units held longer are long-term, taxed at 12.5% on the amount above ₹1.25 lakh a year. For debt funds purchased on or after 1 April 2023, all gains are taxed at your slab rate with no long-term benefit. Rates and holding periods change with the Finance Act — confirm before acting.
The TDS that NRIs face
Unlike resident investors, NRIs have TDS deducted by the fund house at redemption — broadly 20% on equity short-term, 12.5% on equity long-term, and slab/higher rates on debt. A DTAA can lower this if you provide a TRC and Form 10F. Example: an NRI redeems an equity fund with a ₹3 lakh long-term gain — tax applies on ₹1.75 lakh (after the ₹1.25 lakh shield) at 12.5%, and TDS is withheld on that.
Getting any excess back
Because TDS is often more than your final tax, filing an ITR-2 is how you recover the difference. Keep your AIS and the fund house’s statements to reconcile. Our NRI income tax compliance service can file and claim it.