I am father of an NRI who has a NRE account of which I'm the power of attorney holder. I have invested some money in two year FMP. I am aware that NREs are liable for long-term capital gains tax. My understanding is tax will be lesser of 20% with indexation and 10% without indexation. I wish to know by which of these two methods will the fund deduct TDS.
-Mahesh Patel.
You are correct that NRIs are liable to pay tax on capital gains at rate of 10% without indexation or 20% with indexation whichever is lower. Fund houses always apply TDS at rate of 20% after providing for indexation in case of long term capital gains.
However, this does not mean that you are committed to this method. If your liability is actually lower by the other method, (or indeed is lower for any other reason) then you can prepare your tax return accordingly and file for a tax refund.
This article was originally published on January 28, 2014.
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