Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
TDS that NRIs face on redemption
Unlike resident investors (who usually face no TDS on mutual-fund gains), an NRI has TDS deducted by the AMC at the time of redemption. The rate follows the gain: roughly 20% on equity short-term gains, 12.5% on equity long-term gains above ₹1.25 lakh, and slab or 30% on debt-fund gains — each with surcharge and cess. Confirm current rates per the Finance Act.
Reduce it with a treaty
Because TDS is deducted on the gain at these rates, it is often more than your final tax once the ₹1.25 lakh equity shield and your slab are applied. A DTAA can lower the rate if you have lodged a TRC and Form 10F with the fund house. Otherwise you recover the excess by filing.
A worked example
Example: you redeem an equity fund with a ₹3 lakh long-term gain. After the ₹1.25 lakh shield, ₹1.75 lakh is taxable at 12.5% (₹21,875), and TDS is withheld broadly on that basis. If too much was deducted across your folios, filing an ITR brings it back. Keep the AMC’s capital-gains statement and TDS certificate to reconcile. Our NRI tax service can file and claim it.