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International mutual fund tax for NRI

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Jay Patel

42 Points Posted on 31 May 2023

International mutual funds are considered as debt funds in India. Now with current change in tax rules, debt funds would be taxed at income tax slab rate, irrespective of holding period (meaning no short/long term).

Now most of the NRIs would be falling in Nil or 5% tax rate if they dont have any other major income from India. Then in this case wont it make sense to invest in international mutual funds since there wont be any tax (Nil or 5%) as compared to equity mutual funds?

I am not tax expert so please correct me if I am wrong with my understanding. Thankyou.

Replies (3)

Quick Summary

Recent changes in Indian tax laws mean international mutual funds are now taxed as debt funds at your income tax slab rate, regardless of how long you held them. For many NRIs in lower tax brackets (0-5%), this could make investing in international funds more tax-efficient than equity funds. This discussion explores this potential advantage and prompts clarification on the nuances of NRI global income tax reporting and Double Taxation Avoidance Agreements (DTAA).

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

121543 Points Posted on 01 June 2023

For NRIs investment in international mutual funds through Indian rupee source is not routed directly.

Jay Patel

42 Points Posted on 01 June 2023

@ Dhirajlal. Thank you for your reply. Can you please elaborate your reply?

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

121543 Points Posted on 01 June 2023

There are many factors to be considered before the net tax liability.

In nutshell, consider the taxability of the income earned in India, while declaring global income in the country of origin under DTAA and nil tax paid in India!!!