Should you be an NRI (Non-Resident Indian) making investments in Indian stocks or mutual funds, you may find yourself wondering about your tax obligations on gains. Non-resident capital gains tax on shares is subject to slightly different regulations than those for residents. Still, don’t panic; here’s a basic guide to make sense of things.
Capital Gain: What Is It?
Selling a share or mutual fund unit for more than you paid for results in a profit known as capital gain. Your tax paid relies on:
- Your holding period for the shares
- Whether the shares appear on an Indian stock exchange
- Whether you’re selling debt mutual funds or equity
Short Term vs Long Term: Holding Period
| Investment Type | Term | Short Term (STCG) | Long Term (LTCG) |
| Equity Mutual Funds / Shares | Under less than one year | Over a year more than one | |
| Loan Mutual Funds | Less than three years | Over three years |
Tax Rates for Capital Gains NRIs
- Listed Equity Shares and Equity Mutual Funds:
- STCG (less than one year): 15% tax
- LTCG (more than one year): 10% tax on gains in a financial year exceeding ₹1 lakh
- No advantage in indexation
- STCG (less than one year): 15% tax
- Unlisted Shares:
- STCG: Taxed at 30%
- LTCG: 10% taxed without indexation
- STCG: Taxed at 30%
- Mutual Funds for Debts:
- Gains taxed at your slab rate
- TDS taken out prior to payment
- Gains taxed at your slab rate
TDS for NRIs
Tax Deducted at Source (TDS) applies whether you sell shares or mutual funds:
- Regarding LTCG on equity shares: Ten percent
- For STCG regarding equity shares: 15%
- For debt or unlisted funds, depending on the kind of income, up to 30%
When you submit your tax return in India, you can claim TDS credit.
DTAA: Double Taxation Avoidance Agreement
Should your place of residence have a DTAA with India, you could be spared paying tax twice:
- Tax paid in India qualifies you for tax credit back home.
- Every NRI should find out if India’s DTAA matches their own.
Important Advice for New Zealanders
- Open an NRE or NRO Demat account prior to making investments.
- Track your holding period closely to find your tax rate.
- Always look for TDS and document it for your return file.
- Think about DTAA advantages to escape double taxes.
- If you have capital gains, file an Indian income tax return.
Lastly
Knowing non-resident capital gains tax on shares improves your investment planning. Your TDS rules and tax rate as an NRI differ from those of people living in India. But you can legally and cleverly save tax and boost your returns with appropriate knowledge and a little bit of planning.