Author: Reena M
Profile: https://www.linkedin.com/in/aryansinghofficial28/
A Dubai-based engineer had ₹1.8 crore in Indian mutual funds.
When he redeemed in March 2026, his bank deducted 20% TDS before transferring the proceeds.
He expected a refund. His CA told him the refund process takes 12–18 months.
₹36 lakhs sitting with the Income Tax Department. Earning nothing. While he waited.
This is the most common NRI wealth problem that never gets discussed before the transaction.
The mechanics: when an NRI redeems equity mutual funds in India, TDS is deducted at source,10% on long-term capital gains above ₹1.25 lakh, 15% on short-term. On debt funds: 20% flat. This TDS is applied regardless of your actual tax liability after DTAA treaty benefits are claimed.
For a UAE-based NRI, zero personal tax in the UAE, the actual Indian tax liability after DTAA often works out to less than half the TDS deducted upfront.
The delta sits with the tax department until you file, claim, and wait.
The solution that most NRIs don't know exists. Form 13, a Lower Deduction Certificate filed before redemption, based on actual estimated tax liability. If approved, TDS is deducted at the correct rate, not the default rate.
Processing time: 4–6 weeks. Savings: potentially ₹15–40 lakhs on a ₹1–2 Cr redemption.
Most NRI investors discover this after the first redemption. Make sure you send this to your NRI collegue who is going to make his/her first redemption.
When he redeemed in March 2026, his bank deducted 20% TDS before transferring the proceeds.
He expected a refund. His CA told him the refund process takes 12–18 months.
₹36 lakhs sitting with the Income Tax Department. Earning nothing. While he waited.
This is the most common NRI wealth problem that never gets discussed before the transaction.
The mechanics: when an NRI redeems equity mutual funds in India, TDS is deducted at source,10% on long-term capital gains above ₹1.25 lakh, 15% on short-term. On debt funds: 20% flat. This TDS is applied regardless of your actual tax liability after DTAA treaty benefits are claimed.
For a UAE-based NRI, zero personal tax in the UAE, the actual Indian tax liability after DTAA often works out to less than half the TDS deducted upfront.
The delta sits with the tax department until you file, claim, and wait.
The solution that most NRIs don't know exists. Form 13, a Lower Deduction Certificate filed before redemption, based on actual estimated tax liability. If approved, TDS is deducted at the correct rate, not the default rate.
Processing time: 4–6 weeks. Savings: potentially ₹15–40 lakhs on a ₹1–2 Cr redemption.
Most NRI investors discover this after the first redemption. Make sure you send this to your NRI collegue who is going to make his/her first redemption.