Rohit Malhotra asked on 10/09/2020

what taxation is applicable for mutual funds invested in the US market? I heard it is 20%

answered on 10/09/2020

Taxation on Mutual Funds for NRI: Different types of Mutual Funds are taxed differently


*(Equity Funds: An equity fund is a mutual fund that invests principally in stocks)


*(Debt Funds: A debt fund is a mutual fund that invests in fixed-interest generating securities such as corporate bonds, government securities)


Nature of Profits / Income

Equity Funds*Debt Funds*
Minimum Holding period for Long term capital gains1 year

3 years

Short term capital gains taxation

15% + 4% cess* = 15.60%As per the tax rate of the investor (30% + 4% cess = 31.20% for investors in the highest tax slab)
Long term capital gains taxation10% + 4% cess = 10.40% (if the long term gain exceeds Rs 1 Lakh)

(long term gains up to Rs 1 Lakh is tax-free) 

20% with indexation*


*(Cess: A cess is a tax on tax that you pay to the government for purposes set by the government. The cess is charged till the objective set by the government is fulfilled. Eg: Krishi Kalyan Cess, Swachh Bharat Cess etc.)


*(Indexation: Indexation refers to the technique of adjusting income payments using a price index to maintain the purchasing power of the public after inflation) 


The above mentioned taxation is applicable to all the Mutual Fund Investments done through Indian Fund Houses that accept investments from NRIs. There are segregations based upon whether the funds chosen for investments are equity funds or debt funds.


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