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NEW DELHI : I am a non-resident Indian (NRI) planning to switch from a debt mutual fund to an equity MF within an AMC in India (invested a year ago). How much tax (TDS and capital gains tax etc.) is applicable in the case? I have no taxable income from India and never filed ITR in India. Do I need to file ITR in India once switching or redemption is done? Can I get a refund on tax if deducted?.

—Name withheld on request

Switching within the same AMC from a debt fund to an equity fund is effectively a redemption request. Therefore, even though you have reinvested the funds, you have to pay capital gains tax on the redemption of your debt mutual fund. Gains from sale of a debt mutual fund which is held for less than three years are taxed as per normal income tax slab rates applicable to the individual.

Capital gains of NRIs are subjected to TDS, therefore the AMC will deduct TDS before making a payment to you towards redemption. In case your total income is below the minimum exemption limit you can choose to submit a declaration to the AMC along with a certificate from your income tax officer that a lower or nil rate of TDS should be applied. Else you can file an income tax return in India and seek a refund of TDS if your total income is below the minimum exemption limit. Income tax return is filed when a financial year ends for the sale/redemption made by you during the year which begins on 1 April of one year and ends on 31 March of the following year.

Is dividend on shares for NRI, which is 20% and deducted by the company granting, refundable by the IT department or not?

—Name withheld on request

Dividend paid by an Indian company is taxable in India in the hands of the shareholders. Where the shareholder is non-resident in India for tax purposes, dividend income is taxable at 20% (additional cess and surcharge as applicable). Therefore, before making a payment to you a company shall deduct TDS at the rate specified above. In case a double taxation avoidance agreement exists between the country of your residence and India, TDS may be deducted at a lower rate. If your total income in India is below exemption limit, you may file an income tax return and seek refund of the TDS deducted.

Archit Gupta is founder and chief executive officer, ClearTax. Queries and views at

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