Capital Gains Tax for NRIs on Mutual Funds (2024 Rules)
How Indian mutual fund gains are taxed for NRIs after the July 2024 changes: 20% short-term and 12.5% long-term on equity, slab rate on debt, plus TDS at source and DTAA relief.
If you are an NRI holding Indian mutual funds, the way your gains are taxed changed in 2024.
The Union Budget of July 2024 revised the capital gains rules, and the effects apply to redemptions made on or after 23 July 2024.
This guide explains what changed, how equity and debt funds are now taxed, and what NRIs in particular need to watch for.
Please note. This is general information, not personal tax advice. Tax rules change and depend on your own situation and country of residence. Confirm your position with a qualified tax adviser before acting.
What changed in 2024
Three things matter most for mutual fund investors.
- Equity funds, long-term gains. The long-term capital gains rate rose from 10% to 12.5%. The annual exemption also rose, from $1K to $0 lakh of gains per year.
- Equity funds, short-term gains. The short-term rate rose from 15% to 20%.
- Indexation. The benefit of indexation was removed across most asset classes, continuing a direction set in 2023 for debt funds.
Rates above are before any applicable surcharge and cess.
How equity mutual funds are taxed now
An equity-oriented fund is one that holds at least 65% in Indian equities.
The holding period decides the treatment.
- Held 12 months or less: short-term capital gains, taxed at 20%.
- Held more than 12 months: long-term capital gains, taxed at 12.5% on gains above $1K in the financial year.
The $1K exemption applies to your total long-term equity gains for the year, not per fund.
How debt mutual funds are taxed now
Debt funds changed earlier, in April 2023, and the direction was confirmed in 2024.
For units of a specified debt fund bought on or after 1 April 2023, gains are added to your income and taxed at your slab rate, regardless of how long you held them.
There is no separate long-term rate and no indexation for these units.
Units bought before 1 April 2023 may still follow the older rules, so the date of purchase matters.
What NRIs should watch in particular
The headline rates are the same for residents and NRIs, but three practical points are different for you.
TDS is deducted at source
When an NRI redeems mutual fund units, the fund house deducts tax at source before paying you.
For equity funds this generally follows the 20% short-term and 12.5% long-term rates, and for debt funds it follows the applicable slab treatment, in each case with surcharge and cess where relevant.
This means cash reaches you after tax has already been withheld.
You may be able to claim DTAA relief
India has Double Taxation Avoidance Agreements with many countries, including the UAE.
Depending on the treaty and your residency, you may be able to reduce Indian tax or avoid being taxed twice.
Claiming relief usually requires a Tax Residency Certificate and correct filing.
Filing a return can recover excess TDS
If the tax withheld is more than your actual liability, for example because your long-term equity gains were within the $1K exemption, you can file an Indian income tax return to claim a refund.
Many NRIs leave this money unclaimed simply because they do not file.
What this means for your portfolio
The changes do not mean you should stop investing in Indian funds.
They do mean two habits matter more than before.
- Hold the right assets in the right place. The debt fund change makes the after-tax comparison between debt funds, deposits and other income options worth revisiting.
- Plan redemptions. Using the annual long-term exemption and timing sales thoughtfully can make a real difference over the years.
These are decisions best made as part of one coordinated plan, not fund by fund.
How RuDo helps
RuDo is a fee-only, cross-border adviser for NRIs, regulated by the FSRA in ADGM and by SEBI in India.
We help you see your Indian and global investments as one strategy, including how tax and repatriation fit the plan, and we coordinate with qualified tax specialists where specific tax advice is needed.
If you want a clear read on where your portfolio stands, you can link your Indian mutual funds by PAN through MF Central in the RuDo app, or book a wealth review.