NRI Mutual Fund Capital Gains Tax 2025: LTCG, STCG and TDS Rates
NRI mutual fund capital gains are taxed differently from residents — higher TDS rates and DTAA may reduce the burden. Here are the 2025 rates after Budget changes.
Budget 2024 Changes That Affect NRIs
The Union Budget 2024 made two major changes to mutual fund capital gains taxation effective July 23, 2024, that directly affect NRI investors:
- Equity fund LTCG rate raised from 10% to 12.5% on gains above ₹1.25 lakh per year (threshold raised from ₹1 lakh).
- Debt fund LTCG: Post-April 2023 debt fund investments are taxed at slab rates regardless of holding period (the indexation benefit was removed in 2023). For NRIs this means 30% on debt fund gains if held for any period.
- Hybrid funds: Treated as equity or debt depending on their equity allocation — if equity > 65%, equity tax rates apply; otherwise debt rates.
Capital Gains Rates for NRI MF Investors
| Fund Type | Holding Period | Gain Type | Tax Rate |
|---|---|---|---|
| Equity (>65% equity) | ≤ 12 months | STCG | 20% |
| Equity (>65% equity) | > 12 months | LTCG | 12.5% (above ₹1.25L) |
| Debt / Liquid | Any | Slab rate | 30% (NRI peak rate) |
| International/FOF | ≤ 24 months | STCG | 30% |
| International/FOF | > 24 months | LTCG | 12.5% |
TDS on NRI MF Redemptions
Mutual fund companies (AMCs) are required to deduct TDS on NRI redemptions before crediting to your NRO account:
- Equity STCG: 20% TDS.
- Equity LTCG: 12.5% TDS (on gains, not on redemption amount).
- Debt funds: 30% TDS on entire gain.
The TDS is deducted automatically by the registrar (CAMS or KFintech) at the time of redemption — you receive the net amount. If your actual tax liability is lower (due to DTAA or other deductions), you claim the excess as a refund via ITR-2.
How to Claim DTAA Relief and Reduce TDS
Most India-Europe DTAAs allow India to tax Indian capital gains at domestic rates — DTAA does not generally reduce capital gains TDS for NRIs the way it reduces interest TDS. However, DTAA prevents your country of residence from also taxing the same gain at full rate — you will get a credit for Indian tax paid.
To avoid 30% TDS on debt fund gains, apply to the Income Tax department for a lower withholding certificate under Section 197. If your actual tax is lower (e.g., you have losses to offset), the certificate allows the AMC to deduct at a lower rate.
ELSS Funds for NRIs
Equity Linked Savings Schemes (ELSS) with a 3-year lock-in remain available to NRIs. They qualify for Section 80C deduction up to ₹1.5 lakh, and gains after 3 years are treated as LTCG at 12.5%. This is one of the few tax-saving instruments (other than NPS) still accessible to NRIs after PPF restrictions.
Filing ITR to Claim Refund
If TDS deducted exceeds your actual tax liability — common with equity LTCG where gains may be below ₹1.25 lakh — file ITR-2 to claim the refund. The refund is credited to your NRO bank account and can be repatriated within the USD 1M/year FEMA limit.
Use the NRI Tools Wealth tracker to monitor your Indian mutual fund holdings, mark redemption dates, and track unrealised gains — open the wealth tool.