NRI Taxation for Equity and Debt Mutual Funds Scheme

1] What is the tax liability on redemptions?

Ans: The tax treatment for Non Resident Indians (NRIs) investors with respect to Mutual Fund investments is the same that is applicable for Resident Investors except that applicable tax would be deducted at source for NRIs.

2] What is the tax liability for income received from your mutual funds?

Ans: As per Section 10(35) of the Income Tax Act, 1961, income received from mutual fund units specified under Section 10(23D) is exempt from income tax in India and the mutual funds are subject to deduction of distribution tax in debt oriented schemes. Hence all dividends are tax-free in the hands of non-resident investors and no TDS is applicable on the same. We request you to consult your investment advisor and/or Tax consultant for further details/ clarification.

3] What is the proof of the Tax Deduction at Source(TDS?

Ans: A TDS certificate is issued in the name of the Unit holder / First holder mentioning the details of the transaction and the tax deducted. The TDS certificate is commonly known as Form16 A.

Tax is deducted at source on capital gains made on investments by NRIs. Investments in equity funds held over 1 year are exempt from tax and hence no tax is deducted at source. A digitally signed TDS certificate is sent along with the redemption proceeds.

4] When will the TDS certificate be issued?

Ans: A TDS certificate (Form 16A) will be despatched to the investor at his or her registered address along with the redemption warrant. Also some companies despatched to the investors once in a quarter.

5] Is the indexation benefit available to NRIs?

Ans: Yes, if units are held for more than 12 months for equity /36 months for debt i.e. on long-term capital gains.

6] Are fund units liable to the wealth tax?

Ans: No, Units issued to FIIs/NRIs will not be treated as assets as defined under section 2(ea) of the Wealth-Tax Act, 1957 and hence will not be liable to wealth tax.

The tax rates for FY 2017-18 of AY 2018-19.


Capital Gain Tax for FY 2017-18 of AY 2018-19 for Non Resident Indians (NRIs)


Transaction

Short Term Capital Gain (STCG)

Long Term Capital Gain (LTCG)

Equity Mutual Fund

15% + 15% surcharge**+3% Cess = 17.7675%

NIL

Debt Mutual Fund

Base on Individual Tax Slab : i.e. :

As per Slab rates# + 15% surcharge** + 3% cess

10%* (for unlisted) without indexation )i.e. : 10% without indexation + 15% surcharge** + 3% Cess = 11.8450%

& 20% (for listed) with indexation i.e. 20% with indexation + 15% surcharge**+ 3% Cess = 23.690%


TDS applicable only to NRI Investors in case mutual fund investments for FY.2017-18


  Short term capital gains Long term capital gains
Equity Mutual Fund

15% + 15% Surcharge** + 3% Cess = 17.7675%

Nil

Debt Mutual Fund

30% + 15% Surcharge** + 3% Cess = 35.5350%

For unlisted: 10% without Indexation +15% Surcharge** + 3% Cess = 11.8450%

&

For listed: 20% with Indexation +15% Surcharge** + 3% Cess = 23.690%


*Surcharge at the rate of 12% is applicable on domestic companies where the income exceeds INR 10 Crores and where income exceeds 1 crores but is less than 10 crores surcharge of 7% is applicable. **Surcharge at the rate of 15% is applicable on Individuals/HUF having total income exceeding INR 1 Crore and where income exceeds 50 lakhs but is less than 1crore surcharge of 10% is applicable. (a)In the case of a resident individual of the age of 60 years or more but less than 80 years, the basic exemption limit is INR 300,000. (b) In the case of a resident individual of the age of 80 years or more, the basic exemption limit is INR 500,000. (c) Education cess is applicable at the rate of 2% on income-tax and surcharge and secondary and higher education cess at the rate of 1% on income-tax and surcharge. *** In order to qualify as long-term capital asset, the units of mutual funds (other than units of an equity oriented fund) should be held for a period of more than 36 months. In the case of units of equity oriented funds, units would qualify as long-term capital assets if held for more than 12 months. @ In cases where the taxable income, reduced by long term capital gains of a resident individual/HUF is below the basic exemption limit, the long term capital gain will be reduced to the extent of this shortfall and only the balance of the long term capital gain is chargeable to income tax. The benefits of this provision are not available to NRIs. $ For the purposes of determining the dividend distribution tax payable, the amount of distributed income shall be increased to such amount as would, after reduction of the dividend distribution tax on such increased amount at the specified tax rates, be equal to the amount of income distributed by the Mutual Fund. & Rebate of upto INR 2,500 available for resident individuals whose total income does not exceed INR 350,000. ## The Finance Bill proposes corporate tax at the rate of 25% (+12% Surcharge + 3% cess) for the financial year 2017-18 in the case of domestic companies having total turnover or gross receipts in the financial year 2015-16 does not exceed INR 50 crores.

The tax rates for FY 2016-17 of AY 2017-18.


Capital Gain Tax for FY 2016-17 of AY 2017-18 for NRI


Transaction

Short Term Capital Gain (STCG)

Long Term Capital Gain (LTCG)

Equity Mutual Fund

15%

NIL

Debt Mutual Fund

Base on Individual Tax Slab

10%* (for unlisted) without indexation ) & 20% (for listed) with indexation


TDS applicable only to NRI Investors in case mutual fund investments for FY.2016-17


  Short term capital gains Long term capital gains
Equity Mutual Fund

15%

Nil

Debt Mutual Fund

30%

10%* (for unlisted) & 20% (for listed)