Do NRIs investing in Indian mutual funds lose money if it doesn’t grow more than 10% due to the TDS?

The tax that you pay as an NRI on Indian mutual funds depends on the gains you make.

Assuming you gain 20% on your investment of Rs 10 lakhs, your gain is Rs 2 lakhs. The first one lakh is tax exempt. You pay 10% on the remaining amount which comes to 10% of 1 lakh = Rs 10,000. So your effective tax on gain is 5%.

If the gain is only 5% (i.e. less than 10% as per your question), then the gain in rupees is 50,000. You are not liable for any LTCG tax.

So to sum up, you are not losing your gain to taxes if it is small. If the gain is large, then the tax is anyway relatively small. So do not worry about LTCG for long term investments.

To enjoy best mutual funds for an NRI, do check out Jamawealth.com/nri

Note: As an NRI your gains will be subjected to Tax Deducted at Source (TDS) when you redeem. So to get the exemption you may have to file a return and settle it between your domicile country and India if they have a Double Taxation Avoidance Treaty.

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