Is there a taxation difference in investing in mutual funds via NRE and NRO accounts?

What is the difference in investing in mutual funds through NRE account vs NRO account? I mean at redemption time, is there a tax difference between NRE and NRO?

--- Jayakumar Selvi

Shifali Satsangee, Founder, Funds Ve'daa, a mutual fund advisory firm, based in Agra responds:

The difference in investing in MF through an NRE account vs NRO account is that when an investment is made through the NRE account, the redemption proceeds can be credited to the NRE account or NRO account(if investor chooses to), but if investment is made from an NRO account, the redemption proceeds can be credited only in NRO account. TDS is applicable when redemption is being made either to NRE account or NRO account. However it may be noted that in case of NRI who maintains the status of Non Resident at the time of redemption falls under specified asset within Chapter XIIA of Income Tax Act, 1961- Special Provisions relating to certain income of non residents. He/she can take benefit of concessional taxation etc. subject to declaration filed provided in law. Further on change of his/her residential status he/she can continue to be governed by the provisions of this Chapter of Income Tax Act.