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Business News/ Money / Calculators/  Dividend from equity mutual funds is tax exempt
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Dividend from equity mutual funds is tax exempt

Income from MFs could take two formsdividends and capital gains

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I am an NRI and I have a rupee fixed deposit in India whose interest is credited to my savings account. Do I need to file a return for the interest even though tax is deducted at source?

—Samuel John

Non-resident Indians (NRIs) have been provided with concessional tax provisions under which investment income derived from deposits made with banks that are public companies, by remittance of convertible foreign exchange is taxable at the rate of 20% (plus applicable surcharge and cess). If you choose to be governed by these concessional tax provisions, you will not be required to file the return of income provided your total income comprises of only investment income and long-term capital gains (LTCG) and appropriate taxes have been deducted at source.

If the deposits held by you were not made by remittance of convertible foreign exchange or you have earned income from other sources, then you will be required to file your return of income if your total income exceeds 2 lakh (assuming that you are not a senior citizen).

What is the tax treatment for an NRI selling her stock options of a company listed in India?

—Tarika Mehrotra

The tax treatment of the proceeds from sale of listed equity shares would depend upon the period for which the shares have been held.

If the shares have been held for more than 12 months, gains arising on sale of such shares would be exempt from tax in case the transaction is subject to securities transaction tax (STT). Short-term capital gains (STCG) arising from sale of shares held for less than 12 months and subject to STT would be taxable at the rate of 15% (plus applicable surcharge and cess).

NRIs would be eligible for benefits if any under the applicable Double Taxation Avoidance Agreement, which India may have entered into with the country in which the NRI is a tax resident.

What is the difference in taxation for mutual funds (MFs) for an NRI? I have made investments through systematic investment plans (SIP) in equity MFs, and will be shifting to Australia in another month.

—Hari Krishnan

Income from MFs could take two forms—dividends and capital gains. Any dividends on units of equity MFs will be exempt from taxation irrespective of whether you are a resident or a non-resident under the Indian tax laws.

LTCG on sale of equity MFs which are subject to STT are exempt from tax. STCG on sale of units of equity MFs which are subject to STT are taxable at the rate of 15% (plus applicable surcharge and cess).

LTCG computed without considering the benefit of indexation from transfer of unlisted securities would be taxable at the rate of 10%.

Queries and views at mintmoney@livemint.com

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Published: 03 Jul 2014, 06:08 PM IST
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