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NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Taxation

For a non-resident Indian investing in a mutual fund, which statement about tax deducted at source (TDS) on redemption is correct?

For NRI investors, the AMC deducts TDS on capital gains arising on redemption, at rates that depend on whether the gain is short term or long term and on the scheme type. The deduction applies to the gain, not the principal.

  1. ANo TDS is ever applicable to NRIs on capital gains
  2. BTDS applies on capital gains from redemption, at rates applicable to the type of gainCorrect
  3. CTDS applies only on the principal amount redeemed
  4. DTDS is deducted only if the investor holds more than 10 schemes

Explanation

For NRIs, the AMC deducts tax at source on capital gains arising on redemption, with the rate depending on whether the gain is short term or long term and the scheme type. It is levied on the gain, not on principal, and is not linked to number of schemes held.

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