NRI Capital Gains Tax on Shares and Mutual Funds: 2026 Rates and TDS

A resident who sells shares receives the full proceeds and settles the tax later. A non-resident receives the proceeds after the broker, bank or fund house has taken tax out of the gain. That one difference shapes NRI capital gains tax in practice.

The rates are not harsher. Since 23 July 2024, residents and non-residents have paid the same 20% and 12.5% on listed equity. Three things change for a non-resident:

• Tax is deducted at source on each profitable sale or redemption, at the full rate, usually without netting losses made elsewhere.
• The basic exemption limit cannot be used against gains taxed at the special rates, and the rebate is for residents only.
• Gains taxed at slab rates, such as those on debt mutual funds, have tax deducted at 30% whatever the investor's real slab.

So the final bill is often lower than the tax deducted, and the gap comes back only through a return. In a portfolio management service (PMS), where the manager may sell dozens of positions a year, that gap can be large.

This guide covers Indian shares and mutual funds, held directly or through a PMS.

The current rate card dates from the Finance (No. 2) Act, 2024. Its memorandum set out three changes from 23 July 2024:

• Only two holding periods remain: 12 months for listed securities and 24 months for everything else.
• The rate on short-term capital gains from listed equity, where securities transaction tax (STT) is paid, rose from 15% to 20%.
• The rate on long-term capital gains became 12.5% for all assets, indexation was removed, and the annual exemption on listed-equity gains rose from Rs 1 lakh to Rs 1.25 lakh.

Two debt fund changes sit either side of that reset. From 1 April 2023, new purchases of debt-oriented "specified mutual funds" lost long-term treatment. From 1 April 2025 (assessment year 2026-27), the definition was narrowed so that gold funds, exchange-traded funds and most funds of funds were no longer caught.

The Income-tax Act, 2025 came into force on 1 April 2026, and the e-filing portal confirms that the 1961 Act stands repealed from that date. The rules carried over, but every section number changed:

The Finance Act, 2026 then set the rates for the tax year 2026-27 and, from 1 April 2026, taxed company buybacks as capital gains again, not as dividends.

Listed equity shares and equity-oriented fund units become long-term after more than 12 months, counted first-in-first-out within a demat account.

• Short-term capital gains (held 12 months or less) are taxed at 20% under section 196 of the Income-tax Act, 2025, if the sale is chargeable to STT.
• Long-term capital gains (held more than 12 months) are taxed at 12.5% under section 198, on the amount above Rs 1.25 lakh in a tax year. For shares, STT must have been paid on both purchase and sale; for fund units, on the sale.

An equity-oriented fund keeps at least 65% of its money in listed Indian equity shares. Equity ETFs, arbitrage funds and aggressive hybrid funds usually meet the test; check the scheme document.

A sale outside the exchange, where no STT is paid, falls out of sections 196 and 198. Long-term capital gains are then taxed at 12.5% under section 197 without the Rs 1.25 lakh exemption, and short-term capital gains at slab rates.

The Rs 1.25 lakh threshold in section 198 applies to any taxpayer, so a non-resident gets it too. It is one threshold per person per tax year.

Shares and equity fund units bought before 1 February 2018 keep a floor on cost. Section 90 treats the cost as the higher of the actual price and the 31 January 2018 fair value (capped at the sale price).

A resident with little other income can use the unused basic exemption limit to reduce equity gains before the special rate applies. Sections 196, 197 and 198 each give that adjustment only to "an individual or a Hindu undivided family, being a resident".

So a non-resident's equity gains are taxed from the first rupee (after the Rs 1.25 lakh threshold on long-term capital gains). The rebate for small incomes is also confined to residents. This is the most common misunderstanding about capital gains tax for NRIs.

Unlisted shares, including pre-IPO holdings and employee stock, become long-term after more than 24 months. Long-term capital gains are taxed at 12.5% under section 197, without indexation. Short-term capital gains are taxed at slab rates.

The Act has an old protection for non-residents against rupee depreciation. Under section 72(6), gains on shares or debentures of an Indian company are worked out in the foreign currency originally used to buy them, and only the resulting gain is converted back into rupees.

An illustration: shares bought with USD 10,000 at Rs 70 to the dollar cost Rs 7,00,000. They are sold for Rs 10,20,000 at Rs 85, which is USD 12,000. The rupee gain is Rs 3,20,000; the dollar gain is USD 2,000, or Rs 1,70,000.

The catch is where the rule does not reach:

• It excludes equity shares taxed under section 198, so STT-paid long-term gains on listed shares are computed in rupees.
• Section 197(4) says a non-resident's long-term capital gains on unlisted securities are computed without it. That is the price of the 12.5% rate.
• It covers shares and debentures of companies, not mutual fund units.

What is left is mainly short-term gains on shares and long-term gains on listed shares sold without STT. On the wording, short-term gains on listed shares are inside the rule, although some published guides say otherwise and deductors often compute in rupees. If the rupee fell sharply over your holding period, ask your adviser to rework the gain in the return.

The 2025 Act also keeps the older special chapter for non-resident Indians (sections 212 to 218), with reinvestment relief for shares bought in convertible foreign exchange. Ask an adviser whether it helps.

NRI mutual fund taxation outside equity funds depends on what the fund holds and when the units were bought.

Under section 76, units of a specified mutual fund bought on or after 1 April 2023 always produce short-term capital gains, however long they are held, taxed at slab rates.

A specified mutual fund now means a fund that invests more than 65% of its money in debt and money market instruments, or 65% or more in units of such a fund. Liquid, gilt and corporate bond funds are inside it. So are debt ETFs.

For debt mutual funds bought before 1 April 2023, the ordinary rule applies: more than 24 months makes the gain long-term, taxed at 12.5% without indexation.

Gold funds, international equity funds and most funds of funds are neither equity-oriented nor specified. Their units become long-term after more than 24 months and are then taxed at 12.5% under section 197; short-term capital gains are taxed at slab rates.

Units bought between 1 April 2023 and 31 March 2025 were caught by the wider definition that applied then. The common reading is that sales from 1 April 2025 follow the narrower definition; confirm this with an adviser before a large redemption.

Listed units use the 12-month holding period. An equity ETF is taxed like a listed share. A gold or silver ETF held for more than 12 months is taxed at 12.5% under section 197, with no Rs 1.25 lakh exemption; held for less, the gain is taxed at slab rates.

Dividends. Section 207 taxes a non-resident's dividends from Indian companies at a flat 20%. Income distributions from mutual funds also have tax deducted at 20%. A tax treaty can lower the dividend rate.

Buybacks. From 1 April 2026, the Finance Act, 2026 taxes buyback consideration under the capital gains head, a change explained in the Budget 2026 memorandum. Holding period decides the rate.

Surcharge and cess. Every rate in this guide is before surcharge and the 4% health and education cess. For 2026-27 the surcharge on a non-resident individual is 10% above Rs 50 lakh of income, 15% above Rs 1 crore and 25% above Rs 2 crore (37% above Rs 5 crore applies only outside the default tax regime).

The surcharge on dividends and on gains taxed under sections 196, 197 and 198 cannot exceed 15%. Gains taxed at slab rates sit outside that cap.

The 25% tier is tested on income excluding dividends and the capped gains. A large debt fund gain can therefore be taxed at up to 39%, while a listed-equity gain tops out at 23.92%.

Old section 195 required anyone paying a taxable sum to a non-resident to deduct tax first. In the 2025 Act that duty sits in section 393(2), Table Sl. No. 17: "any other sum chargeable under the provisions of this Act" paid to a non-resident, at the "rates in force". Residents face no such deduction on capital gains.

The "rates in force" are listed in Part II of the First Schedule to the Finance Act (see the Finance Bill, 2026 as presented). For a non-resident Indian in 2026-27:

• 20% on short-term capital gains under section 196
• 12.5% on long-term capital gains, whether under section 198 or otherwise
• 30% on other income, which includes slab-rate gains on debt funds and short-term unlisted shares
• 20% on dividends and investment income

Surcharge and cess are added. Where a treaty applies and the investor has given a tax residency certificate, the treaty rate can be used instead.

Who deducts depends on the route:

• Shares in a PIS-linked account: the designated bank computes the gain and deducts tax before crediting proceeds.
• Shares in a non-PIS account: the broker deducts.
• Mutual fund units: the fund house or its registrar deducts at redemption.
• Unlisted shares: the buyer deducts, and often wants a certificate or a chartered accountant's computation first.

Three features of this TDS on capital gains catch NRIs out.

First, it is per sale. A profitable trade has tax deducted even if another made a loss. Some banks net losses within one account during the year; none can see your other accounts.

Second, the Rs 1.25 lakh threshold is generally ignored. The Finance Act's rate entry refers to gains "exceeding Rs 1,25,000", but a deductor cannot know your other gains, so brokers and fund houses typically deduct 12.5% on the whole gain. You claim the threshold in the return.

Third, slab-rate gains are taxed at source as if you were in the top slab. Fund-house reckoners for 2026-27 show 30% TDS on short-term capital gains from non-equity funds and on all gains from specified mutual funds.

Without a PAN, tax is deducted at the higher of the applicable rate or 20% under section 397.

Section 395(1) lets the investor apply to the Assessing Officer for a certificate allowing deduction at a lower rate, or none. The deductor must follow the certificate while it is valid.

The application under the Income-tax Rules, 2026 is reported as Form 128 (old Form 13), filed online on the TRACES portal. We have this from professional commentary and the department's FAQ as quoted in search results, not from the notified rule, so check the current form with your chartered accountant.

A lower deduction certificate is worth the effort when the mismatch is predictable: carried-forward losses, a large slab-rate gain in a low-income year, an unlisted share sale, or a treaty position. It must be in place before the sale.

Rates for the tax year 2026-27 (1 April 2026 to 31 March 2027), before surcharge and 4% cess.

Slab rates under the default regime run from nil up to Rs 4 lakh to 30% above Rs 24 lakh.

The system is clumsy, but it has real merits for someone investing from abroad.

• The rates are the same as a resident's. Since July 2024 there is no non-resident penalty rate on listed equity, and the Rs 1.25 lakh threshold is available to everyone.
• The surcharge on equity gains is capped at 15%. However large the portfolio, listed-equity gains top out at 14.95% long-term and 23.92% short-term.
• Most of the tax is settled for you. The deductor computes the gain and deposits the tax, and the credit appears against your PAN on the e-filing portal. You rarely have to estimate advance tax.
• Losses keep their value. Capital losses can be set off and carried forward for eight tax years, if the return is filed on time.
• Over-deduction is refundable, and a certificate under section 395 can cut the deduction before the sale.
• Some share gains are measured in foreign currency. Where section 72(6) applies, the rupee's fall is not taxed as profit.

NRI capital gains tax is decided by what a manager does inside the portfolio: how often positions are sold, and whether they are held past 12 months. That makes strategy selection a tax decision as much as a returns decision, and it is the part PMS Sahi Hai is built for.

What the platform offers today, going only by its own pages:

• A filter for NRI-eligible strategies. The PMS comparison tool lists 657 PMS strategies with returns, AUM, minimum ticket, style and fee structure, and lets you narrow the list to those open to NRIs.
• Nyra, an AI research tool. Nyra matches strategies by risk, fees and returns, reviews a portfolio for overlap and fee drag, and compares mutual funds with PMS. The site describes it as an analytical tool, not a SEBI-registered investment adviser.
• Plain-language explainers. A PMS and AIF tax primer shows how churn turns long-term capital gains into short-term capital gains, and published guides explain why PMS gains are taxed in your own hands and how a PIS bank deducts tax trade by trade.

What it does not offer is just as important. The site has no NRI tax calculator, no estimator for TDS on capital gains, and no post-tax return figures. Strategy pages do not show portfolio turnover, and the Nyra score is built on returns, risk and consistency, not on tax efficiency. Those numbers have to come from the manager and your chartered accountant.

A practical way to use the two together:

1. Shortlist NRI-eligible strategies on the platform by style, fees and track record.
2. Ask each manager for portfolio turnover and the share of last year's gains that was short-term.
3. Apply the rate table above to estimate tax and TDS for your own facts.
4. Take the shortlist and the estimate to your tax adviser before funding the account.

Both examples assume the tax year 2026-27, no other Indian income, no surcharge and no treaty relief. They are illustrations only.

Meera lives in Dubai and has a listed-equity PMS. During the year the manager books:

• Short-term gains of Rs 9,00,000 on profitable sales
• Short-term losses of Rs 3,00,000 on other sales
• Long-term gains of Rs 5,00,000
• Dividends of Rs 80,000

Assume the deductor deducts on each profitable sale without netting the losses.

Meera is owed a refund of Rs 78,650, and she gets it only by filing a return. If her bank nets losses within the account during the year, the gap shrinks to the Rs 1.25 lakh threshold, worth Rs 16,250.

Arjun lives in London. In October 2026 he redeems:

• Equity fund units bought in June 2023 for Rs 20,00,000, now worth Rs 32,00,000: a long-term gain of Rs 12,00,000
• Debt fund units bought in May 2024 for Rs 15,00,000, now worth Rs 18,00,000: a gain of Rs 3,00,000, short-term by law

Arjun's refund is Rs 1,09,850. The basic exemption cannot shelter the equity gain, but it does shelter slab-rate income such as the debt fund gain. Arjun must also report both gains in the UK, where credit for Indian tax is a separate calculation.

• Cash is locked up. Excess TDS returns only after the return is processed. In a PMS, that is capital the manager cannot reinvest.
• No basic exemption, no rebate. An NRI whose only Indian income is Rs 3 lakh of short-term equity gains pays 20% on all of it.
• Debt and other slab-rate gains are hit hardest. 30% TDS regardless of slab, no long-term treatment for specified funds, and no 15% surcharge cap.
• The foreign-currency rule is narrow. It misses exactly the gains most NRIs have: STT-paid long-term equity, unlisted shares at 12.5% and all fund units.
• Deductors differ. Banks, brokers and fund houses do not treat in-year losses, surcharge or the Rs 1.25 lakh threshold identically. Ask for the computation behind each deduction.
• Treaty outcomes for fund units are unsettled. The view that some treaties exempt mutual fund gains rests on tribunal rulings.
• Home-country tax is separate. The US, UK, Canada and Australia tax worldwide gains, and US persons face the PFIC rules, reported on IRS Form 8621, on Indian mutual funds.

Set-off. Under section 108, a short-term capital loss can be set off against any capital gain, short or long. A long-term loss can be set off only against long-term capital gains. Section 109 bars setting a capital loss against any other kind of income, such as rent or interest.

Carry-forward. Unused losses carry forward for eight tax years under section 111. Section 121 allows this only if the loss was reported in a return filed by the due date.

Who must file. A return is required if total income exceeds the basic exemption limit, or to carry forward a loss. In practice, file whenever tax has been deducted, because a refund is paid only against a return.

Which form and when. Individuals with capital gains and no business income have used ITR-2, which the e-filing portal lists as the form for individuals not eligible for ITR-1; its ITR-2 guide shows the schedules for capital gains, TDS credit and carried-forward losses. The due date for ITR-2 filers remains 31 July after the tax year. Forms for the tax year 2026-27 will be as notified.

Before filing, collect:

• The capital gains statement from each broker, PMS and fund house
• TDS certificates and the tax credit statement on the e-filing portal
• A pre-validated Indian bank account for the refund
• Purchase records in foreign currency, if section 72(6) may apply

Advance tax. It is due under section 404 only if the tax left to pay after TDS is Rs 10,000 or more. That is uncommon for NRIs, but it can arise when a certificate cut TDS too far. Instalments fall on 15 June, 15 September, 15 December and 15 March. No deferment interest is charged on a shortfall caused by a capital gain if the tax is paid in the remaining instalments or by 31 March.

Treaties. A tax treaty overrides the Act where it is more favourable, provided you hold a tax residency certificate. For shares of Indian companies, the treaties most NRIs use, including those with the US, UK and UAE, let India tax the gain, so the rates above apply and the home country gives credit. Whether mutual fund units fall under a different clause for residents of some countries is disputed; one widely reported case is a Mumbai tribunal ruling for a Singapore resident. Our DTAA page for NRIs and DTAA guides cover the concept and the claim procedure.

GIFT City. Funds set up in the International Financial Services Centre run on a separate tax track. Where a fund qualifies as a "specified fund" with only non-resident unit holders, the fund pays tax on its Indian-share gains and the investor's income from the units is exempt in India. That is not tax-free: the fund pays tax, minimums are in US dollars, and home-country rules still apply. We compare the two routes in a separate guide.

The headline rates are simple: 20% and 12.5% on listed equity, 12.5% on most other long-term capital gains, slab rates on debt mutual funds and short-term non-equity gains. The complexity is in collection.

Tax is deducted on each profitable sale, so the more a portfolio churns, the more cash waits for a refund. The basic exemption protects slab-rate income only, and slab-rate gains suffer the heaviest deduction.

That makes the return the centre of NRI capital gains tax planning. File every year in which tax was deducted or a loss was made. Where a large mismatch is predictable, apply for a lower deduction certificate before selling. And have an adviser who knows both India and your country of residence review anything involving a treaty.

For PMS investors, the same logic applies one step earlier. Capital gains tax for NRIs rises with churn, so compare strategies on PMS Sahi Hai with turnover in mind, and use Nyra to narrow the list before you ask managers the tax questions.

Before your next sale, redemption or PMS rebalancing, note for each holding the purchase date, whether the gain will be short-term or long-term, the TDS the deductor will apply and the tax you expect to owe. The gap between the last two is the cash you will wait for.

If the gap is large, speak to a chartered accountant about a certificate under section 395 before you sell.

If you are still choosing where to invest, compare NRI-eligible PMS strategies on PMS Sahi Hai, ask Nyra to shortlist by style and fees, or contact the team with your questions. Then run the NRI capital gains tax numbers with your adviser before you commit. This guide is general information on Indian law as of 13 October 2026, not tax advice. Rates, forms and treaty positions change, so have a tax adviser confirm the figures for your facts.