If you’re an NRI investing in Indian mutual funds, this recent court ruling could be the tax-saving news of the year.
In a significant move that could affect thousands of Non-Resident Indians (NRIs), the Income Tax Appellate Tribunal (ITAT) in Mumbai has ruled that certain mutual fund gains made by NRIs are not taxable in India — thanks to the provisions of the India-Singapore Double Taxation Avoidance Agreement (DTAA).
Let’s break down this important case and what it means for your financial planning 👇
📌 The Case in a Nutshell
Who?
Anushka Sanjay Shah, an NRI residing in Singapore.
What?
She earned ₹1.35 crore in short-term capital gains from selling Indian equity and debt mutual fund units in Assessment Year 2022–23.
Her Claim:
Under Article 13(5) of the India-Singapore DTAA, these gains are not taxable in India, and should be taxed only in Singapore — her country of residence.
What the Tax Dept Said:
Not so fast. The Indian Income Tax Officer disagreed, claiming that mutual fund gains are from Indian assets and should be taxed in India.
Then What Happened?
Ms Shah appealed the decision, and the case went all the way to the ITAT.
⚖️ The ITAT Ruling — A Game Changer
The ITAT ruled in favor of Ms Shah, stating:
Mutual fund units are not the same as shares of Indian companies and should not be taxed like them under the DTAA.
They emphasized that:
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Capital gains from such units are taxable only in the country of residence (Singapore in this case).
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Ms Shah’s investments were made directly, not through a portfolio manager.
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All her transactions were transparent and well-documented via bank statements.
The result?
Her ₹1.35 crore in capital gains will not be taxed in India.
💡 Why This Matters for You
If you’re an NRI investing in Indian mutual funds, this ruling sets a powerful precedent. Here’s what it means:
✅ Clarity on Taxation – You may not have to pay capital gains tax in India if a valid DTAA applies.
✅ Residency-Based Taxation – This judgment reinforces that your tax liability should depend on where you live, not just where your investment is based.
✅ Better Financial Planning – Knowing how tax treaties protect you can help you structure your investments more wisely.
🚨 But Wait… Don’t Jump to Conclusions
Before you go celebrating, keep in mind:
🔍 Each case depends on specific facts, including:
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Your country of residence and the relevant DTAA.
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The nature of the investment (direct or through a portfolio manager).
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Proper documentation of investment and redemption.
🧾 Always consult a qualified tax advisor who understands cross-border taxation before assuming exemption.
🔚 Final Thoughts
This ITAT ruling is a win — not just for one investor, but potentially for all NRIs investing in India. As taxation on global income gets more complex, staying informed and updated is your best strategy.
Donald G. is the Principal Consultant at NRI Money+. He specialises in creating personalised financial plans for NRIs (Non-Resident Indians) and HNI (High Net-worth Individuals).
