Capital gains tax applies to any redemption

—Name withheld on request

Switching from debt fund to equity fund within the same AMC is effectively a redemption request. Hence, even if you have reinvested the fund, you will have to pay capital gains tax on the redemption of your debt mutual fund. Gains from the sale of debt mutual funds held for less than three years are taxed as per the normal income tax slab rates applicable to the individual. Capital gains of NRIs are subject to TDS, so AMC will deduct TDS before paying you for redemption. If your total income is within the exemption limit, you can submit a declaration to the AMC along with a certificate from your Income Tax Officer that low or nil rate of TDS will be applicable. Otherwise, you can file income tax return in India and seek refund of TDS.

Can the dividend on shares for an NRI, which is 20% and is deducted by the paying company, be refunded by the IT department?

—Name withheld on request

Dividend paid by an Indian company is taxable in the hands of shareholders in India. Where the shareholder is a non-resident in India for tax purposes, dividend income is taxable at 20% (additional cess and surcharge as applicable). Therefore, before making the payment to you, a company will deduct TDS at the rate specified above. If a Double Taxation Avoidance Agreement exists between your country of residence and India, TDS can be deducted at a lower rate. If your total income in India is less than the exemption limit, you can file income tax return and seek refund of TDS deducted.

Archit Gupta is the founder and CEO of ClearTax.com