Taxes on Investments in India- FD, Mutual Funds, Equity/Stocks, Real Estate, etc.
Irrespective of which country you travel to, there is something that one must always be cognizant of, taxes. And things can get a bit tricky since you might have to pay taxes at both the places, the current country of residence as well as your country of origin. If you are an NRI and have investment interests back in India, there are some tax laws that you must be aware of.
Being aware of these tax rules would ensure that you are not caught in any crosswinds. And that you are on the top of any taxes that you are liable to pay. The following are the taxes on investments that NRIs must pay.
If you have a property that you have rented out, either for commercial or residential purposes, you are liable to pay taxes on the same. The calculation of taxes remains more or less similar to that of resident Indians. In such cases, an NRI can claim a standard deduction of 30%. On top of that, if they have an outstanding loan, they can claim the principal amount under Section 80C and deduct the property taxes as well.
If you have rented your place, the tenant must deduct 30% as TDS and then pay the rent. An individual making a payment (or remittance) to an NRI must also submit Form 15CA to the income tax department. In certain cases, you might even have to work with a chartered accountant and submit Form 15CB along with Form 15CA.
For NRIs who like to invest in fixed deposits for steady returns, they will also have to pay taxes on the same. The same extends to savings accounts as well. If you have a NRO or FCNR account, then you need not worry about taxes. But for NRO savings account or normal savings account, you are liable to pay taxes as per the applicable tax slab.
When you sell an asset for a price higher than what you had paid to buy, capital gains taxation comes into the picture. Capital gains taxes are defined by duration for which you are holding on to the assets for. You either end up paying short-term capital gain taxes or long-term capital gain taxes.
Depending on the asset class, the definition of a short-term or long-term capital gain changes. If you have any properties that you decide to sell after three years from the date of purchase, it would qualify as long-term capital gain. In such instances, the profit made on the transaction is taxable depending on the tax slab for the NRI. And should you decide to sell the property before the completion of 3 years, short-term capital gain is applicable.
Any investments made on Equity or Stocks or even Mutual Funds follow a similar school of taxation. However, the holding period differs slightly. If you hold on to Equity/stocks or mutual funds for at least a year, they qualify as long term capital gain and short term capital gain if it is held for less than a year.
For such short gains, one must pay 15% taxes on the gains. Whereas for long term gains, the taxes are 10% of the profit amount that exceeds INR 1,00,000.
These are some of the most common modes of investment and their implications on taxation. If you have invested in any of these avenues, it is recommended to pay the applicable taxes or reach out to a chartered accountant for additional help.