TDS(TaxDeductedatSource)
Definition
A mechanism where the payer deducts tax at a prescribed rate before making a payment and deposits it with the government. For mutual fund redemptions by resident investors, TDS is generally not applicable. However, NRI investors are subject to TDS on mutual fund capital gains at rates specified by law.
Example
When an NRI redeems equity mutual fund units with LTCG, TDS of 12.5% is deducted on gains exceeding Rs 1.25 lakh. The NRI can claim credit for this TDS while filing their income tax return.
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