A groundbreaking ruling by the Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has clarified that NRIs are not liable to pay tax in India on capital gains from the sale of mutual fund units, if they are resident of few countries….!
✅ What Does This Mean?
Under the Anushka Sanjay Shah Versus ITO case, the ITAT reinforced the DTAA (Double Taxation Avoidance Agreement) principles, stating that capital gains on mutual funds shall be taxed only in the country of residence, provided the DTAA supports this clause.
📌 Example Scenario:
Imagine Mr. X, an NRI, who invested:
₹1 Crore in Indian mutual funds
₹2 Crore in Indian shares
₹3 Crore in Singapore shares
After 10 years, Mr. X permanently moves to Singapore and sells all his investments. Under the India- Singapore DTAA, Mr. X must pay capital gains tax in India only on the sale of Indian shares—his mutual fund gains remain untaxed in India.
📌 Key Taxation Rules:
✅ Mutual Funds → Taxed in the country of residence (Singapore, in this case, at present does not tax capital gains on mutual funds)
✅ Shares → Taxed in the country where the issuing company is resident
· Indian shares → Taxed in India
· Singapore shares → Taxed in Singapore
🌍 Countries with DTAA’s Residual Clause & Zero Tax on Mutual Fund Gains:
🔹 Singapore
🔹 Mauritius
🔹 UAE
🚀 What’s the Big Takeaway?
This ruling is a game-changer for NRIs investing in Indian mutual funds—ensuring better clarity, tax efficiency, and strategic investment advantages. If you’re an NRI, this is your moment to optimize your portfolio and make informed financial decisions.
Note: If it is proven that one of the principal purposes of shifting to other country is to avoid the tax then this exemption may be denied.
#NRI #CapitalGain #MutualFund #DTAA