Filing your NRI return when capital gains are spread across brokers and funds

Each broker and each fund house issues its own capital-gains or profit-and-loss statement, and each one only sees the trades that happened on its own platform. None of them sees the whole picture. So if you bought a stock through one broker and the corporate action or a transfer landed it elsewhere, or if you hold the same fund across two platforms, no single statement computes your true gain.

The return has to bring all of them together, line the buy and sell sides up correctly, and then reconcile the combined result against the Annual Information Statement (AIS) and Form 26AS — which the department builds from the same brokers and fund houses, plus the registrars. When the AIS shows a sale your statements don't capture cleanly, or a cost the broker reported on a different basis, the mismatch has to be resolved before filing, or the return draws a query later.

For a non-resident this matters more than for a resident, because TDS is deducted on redemptions (Section 195) and you are usually filing specifically to reconcile that withholding and claim back any excess. The reconciliation is the work; the form is the easy part.

Capital gains split by how long you held the asset, and listed equity and equity mutual funds have their own rules and rates. The rates for listed equity changed for transfers on or after 23 July 2024, so a single financial year straddling that date can carry both old and new rates.

For listed equity and equity-oriented mutual funds held more than twelve months, the gain is long-term under Section 112A: the first ₹1.25 lakh of such gains in the year is exempt, and the balance is taxed at 12.5% (for transfers on or after 23 July 2024). Held twelve months or less, the gain is short-term under Section 111A, taxed at 20% for transfers on or after that date.

Debt-oriented mutual funds bought on or after 1 April 2023 no longer get long-term treatment at all — those gains are taxed as short-term at your applicable rate however long you held them. Because the year can contain transfers both before and after 23 July 2024, each transaction is dated and rated individually rather than rolled up at one rate.

Long-term gains on listed equity were tax-free until Section 112A was introduced. To avoid taxing the gain that built up before the regime existed, the law grandfathers older holdings: for shares and equity mutual funds bought before 1 February 2018, the cost used in the gain calculation is the higher of what you actually paid and the asset's market value as on 31 January 2018, capped at the eventual sale price.

The practical effect is that the run-up in value up to 31 January 2018 is protected, and only the gain from that date forward is taxed. For an investor who has held blue-chip equity or an old fund for many years, this can be the difference between a large taxable gain and a modest one — but it only works if the 31 January 2018 reference value is applied to each eligible holding, which a generic broker statement often doesn't do.

This is reported in the dedicated Schedule 112A of ITR-2, line by line, with the original cost, the 31 January 2018 value and the sale value for each grandfathered holding. Getting the reference values right across many holdings is one of the more painstaking parts of the return.

Vikram, an NRI in Singapore, sells in the financial year through two brokers and redeems units with one mutual fund house. After consolidating all three statements, his gains come out as: ₹6,00,000 long-term on listed equity (all sold after 23 July 2024), ₹2,00,000 short-term on listed equity, and a mix of redemptions on which the fund house deducted TDS under Section 195.

On the long-term equity, the first ₹1,25,000 is exempt under Section 112A, leaving ₹4,75,000 taxed at 12.5% — about ₹59,375. Two of the holdings were bought in 2015, so their cost is stepped up to the 31 January 2018 value under grandfathering before the gain is even computed, which trims the long-term figure compared with using the original purchase price.

The ₹2,00,000 short-term equity gain is taxed under Section 111A at 20% — ₹40,000. Against the total tax, the TDS the fund house already deducted on the redemptions is set off; if the withholding was more than the final liability, the excess is refunded, and if less, the balance is paid before filing.

Filed on ITR-2 with Schedule CG and Schedule 112A completed line by line, and every transaction reconciled against Vikram's AIS, the return holds up against the department's own data. Done by eye across three statements with one blended rate, it usually doesn't.

It helps to understand why grandfathering exists, because that is what tells you how much it is worth to you. Until February 2018 there was no tax at all on long-term gains from listed shares and equity mutual funds. When the tax came in (Section 112A), it would have been unfair to suddenly tax the entire run-up that had built over the previous decade or two — so the law drew a line at 31 January 2018 and protected everything below it. Only the growth from that date onward is taxed.

The way the line is drawn is a special cost rule. Instead of using what you originally paid, the cost is treated as the higher of your actual purchase price and the share's market value on 31 January 2018 — and that protected cost is then capped at your eventual sale price so the rule can never manufacture a loss. So the value your holding had reached by 31 January 2018 is handed to you tax-free, and the tax only bites on what it gained afterwards.

For a long-held portfolio this is often the single biggest number on the return. A blue-chip share bought in 2009 for ₹100 that was worth ₹900 on 31 January 2018 and is sold now for ₹1,500 is taxed on ₹600 of gain, not ₹1,400 — the ₹800 that accrued before the cut-off simply isn't in the tax net. The catch is that it only works if the correct 31 January 2018 value is found and applied to each eligible holding one by one, which is exactly the step a quick broker statement tends to skip.

One of the most common surprises on an NRI return is tax on a switch — moving money from one mutual-fund scheme to another, often inside the same fund house, where no money ever reached your bank account. It feels like simply rearranging your own holdings. For tax, it is not.

When you switch, the fund house redeems your units in the first scheme and uses the proceeds to buy units in the second. That redemption is a sale of an asset, so it is a transfer that triggers capital gains exactly as a normal redemption would — the gain is measured, the holding period decides short-term or long-term, and tax (and TDS under Section 195 for a non-resident) applies. The fact that the cash never left the fund house, or that it was a switch between two plans of the very same scheme, makes no difference. Regular-to-direct plan switches, dividend-to-growth option switches, and one fund to another all count.

This is where multi-broker, multi-AMC returns go wrong most often. Switches show up in your AIS as redemptions, because that is what they legally are — but an investor reading their own year remembers only the trades where money actually moved, and leaves the switches out. The return then under-reports gains against the department's data and draws a mismatch query. Every switch in the year has to be captured and taxed as the redemption it is, even when it felt like nothing happened.

If part of your portfolio sits in debt mutual funds — liquid, money-market, gilt or other debt-oriented schemes — a rule change from a few years ago catches a lot of NRIs off guard. For units bought on or after 1 April 2023, the long-term concession on debt funds is gone entirely (Finance Act 2023). However long you hold them, the gain is treated as short-term and taxed at your ordinary slab rate, with no special long-term rate and no indexation.

The old expectation was that holding a debt fund for three years turned the gain long-term and brought a softer rate. That no longer applies to anything bought from April 2023 onward. A debt-fund gain on a post-2023 purchase is simply added to your other income for the year and taxed at the slab that income reaches — the same as bank interest, in effect. Only debt-fund units bought before 1 April 2023 still carry the older long-term treatment, which is why the purchase date on each lot has to be checked rather than assumed.

The practical point for the return is to keep these gains in a separate basket from your equity gains. Equity long-term sits at 12.5% over the ₹1.25 lakh exemption (Section 112A) and equity short-term at 20% (Section 111A); a post-2023 debt-fund gain belongs to neither of those — it goes in at your slab rate. Blending a debt-fund gain into the equity figures, or assuming a holding period saved it, is a common way the computed tax comes out wrong.

A bad year in the market is not all bad on the return, because a capital loss has value: it can be carried forward and used to reduce the tax on gains in later years. But that benefit is conditional, and the condition trips up people who file late.

First, how a loss can be used. A loss is set off within the year before anything is carried forward, and the rules differ by type (Section 74). A short-term capital loss is flexible — it can be set against either short-term or long-term gains. A long-term capital loss is narrower — it can only be set against long-term gains, never short-term. Whatever is left after the year's own set-off can then be carried forward for up to eight assessment years and used against future capital gains of the matching type.

The condition is the part that matters most: to carry a capital loss forward, the return has to be filed by the original due date under Section 139(1). File late — a belated return — and the loss for that year cannot be carried forward at all; the right to use it against future gains is simply lost. For an NRI whose gains and losses are spread across brokers and years, this is the quiet reason an on-time filing can be worth far more than the deadline suggests: a loss banked correctly this year is tax saved on a profitable sale two or three years from now, and missing the date forfeits it.