The 60-second version
Section 196A requires 20% TDS on mutual fund income paid to non-resident unit holders — after becoming resident, capital gains follow Section 111A/112 rules instead.
196A applies while NRI — resident redemption uses capital gains rules
Section 196A mandates AMC to deduct 20% TDS on income paid to non-resident unit holders from mutual funds.
After KYC redesignation to resident, redemption triggers Section 111A/112 capital gains — not 196A.
FEMA lane: NRI mutual fund guide.
MF tax by status
| Status | On redemption | TDS |
|---|---|---|
| NRI | 196A income | 20% |
| Resident equity | 111A/112A CG | No TDS on gain |
| Resident debt | 112 CG | Verify AMC |
| ELSS | 3y lock | Same as category |
Redesignation sequence
KYC resident
AMC + KRA update.
Folio check
NRE/NRO mapping.
Redeem post-status
After resident flag.
ITR
Declare CG correctly.
Status flip
196A kit
- Folio stmt.
- KYC redesignation ACK.
- Redemption stmt.
- 26AS.
- ITR.
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Double TDS
Wrong KYC status causes wrong TDS — update KRA before large redemption.
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Still NRI folio?
196A 20% continues until KYC resident.
DTAA relief?
Form 67 + treaty rate on 196A WHT.
SIP continue?
Yes — status determines tax on exit.
194K vs 196A?
194K for residents; 196A for NRIs.
US PFIC?
Form 8621 separate — Indian MF PFIC risk for US persons.
Repatriation?
NRE free; NRO via LRS after tax.
Your tax year is already running.
RNOR status, exit timing, and DTAA benefits all depend on decisions you make before you land. Don't guess.