What will be my tax component if I as a NRI invest in debt funds?
Investing in debt mutual funds as a NRI will make you liable for short term capital gains tax as per
your tax slab if investment in made for less than 3 years and 20% tax with indexation or 10% without indexation for unlisted funds for investment over 3 year period.
Any profit or gains that an individual makes on the sale or redemption of his or her Mutual Fund investment units is called capital gains. These gains can be classified into two types based on the holding period:
• Long Term Capital Gains
• Short Term Capital Gains
The tax rates applicable to the short-term as well as long-term capital gains on the sale of non-equity of Debt Funds for non-resident Indians (NRIs) is as follows:
For short term capital gains: On the sale of non-equity Mutual Funds – as per the income tax slab rate of the investor. However, a 30% TDS rate will apply.
For long term capital gains: Tax of 20% on the sale of listed non-equity Mutual Funds with the benefit of indexation.