I was a resident Indian till Dec 2016. I've moved to UK since then. Unfortunately, I had not updated my bank account to NRO account and had continued to use savings account. I'm now in India for couple of weeks and am changing my account to NRO account and also updating KYC for the mutual funds I invest. For the past one year I had transferred money to India and invested in mutual funds through monthly SIP's, but hadn't changed my resident status with bank and mutual funds.I had withdrawn money from funds once as well (Less than 1 lakh). Is there any Income tax implication for this, as I had Invested in mutual funds and withdrawn money and had not updated my residence status. What should I do about it now? I'm not planning to file tax returns in India as I didn't have any income in India apart from mutual fund withdrawal, which was less than 1 lakh. Kindly advise.
Asked 2 months ago in Income Tax from Bangalore, Karnataka
Since you only had income of Rs. 1 lakhs and no other income in India you are not required to file income tax return and your residential status does not matter.
You need to file income tax return only if your income in India is above Rs 250000 if your age is below 60 or 300000 if your age is above 60.
Hope this helps...
- As you are an NRI, only Indian income is taxable in your hands in India.
- For Indian transactions, convert saving account into NRO account and update address in Banks and in other investment avenues.
- Sale of mutual funds in less than 1 year are treated as short term capital gain and attract STCG tax @15% which is a special rate of tax. As the income is less than Rs.1 lac and as you said you don't have any other income apart from it, you are not required to file ITR and pay tax as the income is less than maximum exemption limit.
Thanks for this, so will there be any issues as I had not changed my resident status and continued investing in mutual funds in India and withdrawn money from the same. if I change my resident status now, will it be alright?
Asked 2 months ago
Yes I don't think there will be any issue in income tax as many NRI still invest normally in India by using their foreign exchange funds and since you are saying your income from India is just ₹1 lakh I don't think you will have to file return of income so it's fine.
Also in future if you invest in India using convertible foreign exchange and earn above ₹250000 then also you will not be required to file income tax return.
Happy to help you.
Do rate the answer if you find the advice helpful.
- Sorry I take my previous reply back.
- Please update your status as NRI of previous years to banks & Mutual fund companies and also update them for the future years. In case of NRI, TDS @15.60% needs to be deducted. In your case as the status was not updated to the bank and mutual fund companies therefore they had not deducted TDS on your payment.
- Update them otherwise it will be problem for mutual funds companies for non-deduction of TDS.
- Also you need to file ITR for the same.
If you have sold the mutual funds before one year, then you are liable to pay capital gain tax @15% plus cess.
You will also have to file return of income in India because slab exemption of 2.5 lacs is not applicable in case of short term capital gain on mutual funds.
Further, you should change the status of your bank accounts because its against the law to keep resident saving account in India for NRI.
You should compulsorily change your accounts as it is not correct for NRI to operate savings bank account. Secondly, if you have sold mutual funds within 1 year of acquiring them, you will need to pay capital gains tax on the same and file returns in India(irrespective of your income in India)
Hope that resolves your query.
Sorry sir for the above advice the exemption limit of ₹250000 is only available to resident and you being a non resident can't get that benefit. So in your case since you have earned around ₹ 1 lakh from mutual fund I think you will have to file income tax return since there is no minimum exemption limit for NRI as is available for resident.
NRI is exempt from filing return of income if he has earned income by investing into something and using convertible foreign exchange and TDS has been deducted on such income.
However in your case since you have invested using your saving bank account income and since you had not changed your status with mutual fund they would not have deducted TDS.
Therefore it is adviced to file return of income by 31st August and relax.
You need to change your residential Status with the bank and mutual fund asap. Although for the delay, there would be no penalties.
For the mutual funds withdrawal, calculate the STCG. STCG are chargeable at special rate of 15% (excluding cess) and no slab benefit is available.
You need to file ITR and pay the taxes.
Hope you are doing well !
Firstly, basis exemption limit of Rs. 2.5 lakh in not applicable in case short term capital gain on mutual funds. You will have to file income tax return. If you have sold the investment before one year then it will be treated as STCG. STCG are chargeable at special rate of 15% plus cess.
Please calculate the taxes accordingly and pay the taxes. Otherwise you will be liable for interest and penalty.
Secondly, you will have to change your residential Status with the bank and mutual fund at priority.
Thanks & Regards,
You will have to file return of income in India because slab exemption of 2.5 lakh is not applicable in case of short term capital gain on mutual funds.If you have sold the mutual funds before one year, then you are liable to pay short term capital gain tax @15% plus cess.
Further, you will have to update the status of your bank accounts asap.
1.To comply with FEMA regulations,you should update your residential status in bank records and get your account updated to NRO account.
2.Sale of mutual funds ,having holding period of less than one year will leads to short term capital gain.
3.Taxation depends on the type of mutual fund,If its equity oriented MF and units held for less than 1 yr then STCG will arise ,taxed @ 15%(no slab benefit),and if its non equity then taxed as per individual slab rates.
4.Return filling will be mandatory in your case only if transaction comes under 15% catagory.
Hope it clarifies.