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Withholding Tax

For NRIs investing in mutual funds, in lieu of capital gains tax payable, the mutual fund deducts a certain rate of tax, and only pays the balance back to the investor. This TDS is paid by the fund to the Government, and is called Withholding Tax. In case the investor's residence country has a Double Taxation Avoidance Treaty with India, this tax withheld is available as credit to the tax he has to pay there.

NRIs may thus use the statement of account provided by the mutual fund (which shows tax withheld), and use it in their returns filing in their country of residence.

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