Tax on CG from MF for PIO

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This discussion clarifies tax implications for Persons of Indian Origin (PIOs) investing in mutual funds from their NRE accounts. While NRE investments are generally tax-exempt, confusion arises when redemption proceeds are transferred to an NRO account. The consensus is that capital gains from NRE investments remain taxable, regardless of the destination account. The discussion also touches upon ULIPs and new tax rules introduced in Budget 2021 for high-value premium policies.

naveen jain

naveen jain (Querist)
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01 July 2022 A PIO invests in MF from his NRE account. On redemption if the redeemed amount is transferred by MF to his NRO account, will it be subject to LTCG? As far as my knowledge goes MF investments by PIO from his NRE accounts are exempt from any tax , but I want it to be confirmed. The doubt arises because MF is transferring money to his NRO account, since bank is not accepting money in his NRE account.
Are there any specific requirements for MF to transfer money in NRE account, when they have been given NRE account statements showing money was invested out of NRE funds

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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02 July 2022 1 Interest on NRE deposit is exempt from income tax. LTCG from NRE investment is taxable.
2 No such requirement.

naveen jain

naveen jain (Querist)
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02 July 2022 If PIO buys a long term insurance policy and pays premium on it and insurance company invests part of money as per terms of Policy in equity funds, (ULIP) then on withdrawal of money from accumulated fund does it become taxable as LTCG or is exempt?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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02 July 2022 In Budget 2021, it was announced that if the annual premium of ULIP investments is more than Rs 2.5 lakh (i.e., high value premium policies), the return earned will not be tax exempt. Now, the Central Board of Direct Taxes (CBDT) has issued a notification explaining how the capital gains on unit-linked insurance policies (ULIPs) will be computed. The basic framework suggested by CBDT takes consider of all payments received by the policy holder as income whether it is for withdrawal or as bonus.

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