September 16, 2025 - Updated on March 24, 2026
Tax rules for both NRIs and Indian residents follow a similar structure.
| Capital Gain | Equity Schemes | Non-Equity Schemes |
| Short-term Capital Gain | 20% (less than 12 months) | Added to the income and taxed as per tax slab |
| Long-term Capital Gain | 12.5% on gains over ₹1.25 lakh in a financial year (more than 12 months) | Added to the income and taxed as per tax slab |
The capital gains tax regime for mutual funds has been revised such that:
- Short-term capital gains for equity funds are taxed at 20%, without exemption.
- Long-term capital gains on equity funds held for more than one year are taxed at 12.5% on gains above ₹1.25 lakh per financial year.
NRI Double Taxation and DTAA
If an NRI’s country of residence lacks a Double Tax Avoidance Agreement (DTAA) with India, the NRI may be subject to tax in both countries. India has several DTAAs to prevent such double taxation involving mutual fund capital gains and other income.
Also Read: Mutual Fund Taxation for NRIs
Repatriation and RBI/FEMA Compliance
NRIs are allowed to repatriate funds from India under RBI and FEMA norms. NRIs may remit up to USD 1 million per financial year from their NRO account after fulfilling tax liabilities and documentation requirements. Repayment and repatriation compliance is mandated by the RBI and FEMA for all NRIs investing and sending funds abroad.
Special Note on NRI Accounts and Transfers
- NRE Accounts: Investments and returns are fully repatriable.
- NRO Accounts: Repatriation up to USD 1 million per year is allowed after payment of applicable taxes and compliance with documentation.
USD 1 Million Scheme – Current NRI Rule
Non-Resident Indians (NRIs) have provisions under FEMA that allow repatriation of up to USD 1 million per financial year from their NRO accounts, subject to meeting tax and RBI documentation requirements.
Remittances by NRIs, Persons of Indian Origin (PIOs), and Overseas Citizens of India (OCIs) from their NRO accounts fall under this exemption as regulated by RBI and FEMA.
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About the Author
Mr Shashi Kant Bahl
Mr. Shashi Kant Bahl is a mutual fund professional with nearly 20 years of experience in the financial services industry. Since 2005, he has helped over 10,000 investors manage their mutual fund investments and build long-term wealth. His firm currently manages assets of over ₹734 crore (AUM).
Disclaimer: Mutual fund investments are subject to market risks. Read all scheme-related documents carefully.
