Taxation And Related Queries

NRI_Taxation

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• What is the tax liability on receipt of Income on Mutual Fund Units?

  As per Section 10(33) of the Income Tax Act, 1961 ('Act') income received in respect of units of a mutual fund specified under Section 10(23D) is exempt from income tax in India and the mutual funds are subject to pay 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.

• What are ‘Capital Gains’?

  Under Section 2(42A) of the Income Tax Act, units of the Scheme held as a capital asset, for a period of more than twelve months immediately preceding the date of transfer, are treated as a long term capital asset, and incase of any gain, its known as ‘Long Term Capital Gain’, - thus attracting long term capital gains tax rate.

  In all other cases it would be treated as a short-term capital asset and would attract short-term capital gains tax rate.

• What are the applicable Tax Rates and TDS Rates to NRI's / PIO's / FII's?

  

• What is the tax - rate on capital gains for FIIs?

  Long-term Capital Gains and Short-term Capital Gains arising to FIIs from the transfer of the units of the Scheme will be taxable at the following rates:

  Nature of income	Tax rate (excluding surcharge, as may be applicable)
  Long-term Capital Gains	10 percent
  Short-term Capital Gains	30 percent

  Such gains, in either case, would be calculated without indexation of cost of acquisition and without conversion of cost of acquisition in foreign currency.

• What is the rate of Tax Deduction at Source for FIIs?

  No tax would be deductible at source from the capital gains (whether long-term or short-term) arising on repurchase/redemption of units in view of the provisions of Section 196D(2) of the Act.

• What is the proof of the Tax Deduction at Source?

  A TDS certificate is issued in the name of the investor mentioning the details of the transaction and the tax deducted. The TDS certificate is commonly known as Form16 A.

• When the TDS certificate will be issued?

  A TDS Certificate in Form 16A is dispatched within 25 days at the end of every quarter at the registered address of the investor. To obtain a duplicate TDS certificate, investor can write a letter quoting his account number requesting for a duplicate TDS Certificate.

• Is the indexation benefit available to NRIs?

  Yes, in case units are held for more than twelve months i.e. on long-term capital gains.

• Are units of Mutual Funds chargeable in Wealth Tax?

  No. Units issued to investors (including NRIs) etc. 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.

• Can a dividend from DSP BlackRock Mutual Fund credited to an investor's NRO account be repatriated?

  Yes. Though an investment may be done on a non-repatriable basis, according to the provisions for NRI investments, the income generated from investments (dividend in this case) done on a non-repatriable basis qualify for full repatriation.

• Is there any Tax liability on switching from one option to the other?

  Yes. On switching from the Growth option to the Dividend option, the investor is liable to TDS at the applicable tax rate.

• Is Securities Transaction Tax applicable to NRI investors?

  Yes

• Where can I get the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 and Schedule 5 thereof?

  You may visit Reserve Bank of India (RBI) website at http://www.rbi.org.in for further details.