TAX DEDUCTED AT SOURCE (TDS) AND ACTUAL TAX RATES
Applicable tax rate is a major confusion in the mind of the NRIs as the portfolio managersthrough whom they transact with are supposed to charge TDS at the highest rate applicable even though the tax rate liability is less. There is a difference between applicable tax rate to an NRI and the TDS rate charged by the portfolio managers. NRIs need to file tax returns so that right amount of tax is paid to the tax authorities. When NRIs get a tax deducted amount at the time you sell your investment in Indian mutual funds; you will have to file for a refund of your additional tax.
The table below is the comparison between actual tax rate applicable and the corresponding tax deducted at source (TDS) rate applied to NRIS for their investment in theMutual funds:
Note: In case of Units of Equity Oriented Schemes purchased before 31st January 2018, the cost of acquisition for such units of Equity Oriented Schemes shall be calculated as follows:
1) the actual cost of acquisition;
2) at the Fair Market Value as on 31 January 2018 or the actual sale consideration whichever is lower;
3) Final cost of acquisition will be the higher of 1 or 2 above.