I have been investing in investment funds for four years. I moved to Dubai last year and am currently a Non-Resident Indian (NRI). Let’s say, if I quit all my mutual fund investments now, will I have zero tax liability?
— Name withheld upon request.
I am assuming that you qualify as a non-resident (“NR”) in India under the relevant income tax laws and also that you do not qualify as a deemed resident of India under the relevant income tax laws.
Mutual fund units qualify as capital assets and any gain or loss arising on transfer of such mutual fund units qualifies as capital gain or loss for tax purposes. Since the domicile of these capital assets is in India, any such capital gains will be deemed to have accrued or arisen in India and are therefore taxable in India as per domestic tax laws, even if you qualify as an NR in India.
However, you can examine and apply the provisions of Art. 13 of the India-UAE Double Taxation Avoidance Agreement (DTAA) if more favorable which may exclude such capital gains on sale of Indian mutual funds from Indian taxation if you qualify as a UAE resident under the provisions of the DTAA and after meeting other basic conditions.
However, please note that any DTAA exemptions will have to be properly claimed by filing an Indian Income Tax Return and appropriate forms. To claim the DTAA benefit, a valid UAE Tax Residency Certificate for the relevant period will be required. All requested DTAA benefits may be subject to a detailed examination by the tax authorities based on the facts and the interpretation of specific provisions.
Parizad Sirwalla is Partner and Head of Global Mobile Services, Tax, KPMG in India.
Posted: May 19, 2024 14:01 EST
