How to invest in Mutual Funds Part – 2 (A guide for Non Resident Indians)

Dividend.
No dividend distribution tax on equity oriented schemes (schemes that have invested more than 50% of their total proceeds into the equity markets).

Dividend Distribution Tax (Levied on Debt Funds)
Mutual fund pays a distribution tax of 14.16% (14.16% + 2.5% surcharge*) directly to the government on dividends from fixed income funds.

Long-Term Capital Gains Tax.
If the investment is held for more than 12 months, the gain is considered to be a Long Term Capital Gain and is taxable at 11.00% (10% + 10% surcharge*) if you do not account for inflation or at 22% (20% + 10% surcharge*) if you adjust your base for inflation.

Short-Term Capital Gains Tax.
If the investment is held for less than 12 months, the gain is considered a Short Term Capital Gain and is taxable at the individual’s appropriate marginal tax rate that is currently capped at 33 % (30% + 10% surcharge*).

STT.
Tax will be deducted at the rates prescribed under the relevant finance act by the mutual fund at the time of redemption.

The investor is provided a tax deduction certificate by the mutual fund for the tax deduction.

Surcharge.
There is no surcharge if your annual taxable income in India is less than Rs. 8,50,000.

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