Denmark NRIs · Capital Gains Tax

Capital gains tax on Indian shares and mutual funds for NRIs in Denmark

Selling Indian equity or mutual funds from Denmark can trigger Indian capital-gains tax. Here's what the treaty allows, what your AMC withholds, and how to reclaim the excess.

If you invest in Indian listed shares or mutual funds while living in Denmark, the treaty decides whether India can tax the gain at all. Article 14(6) gives Denmark the sole right to tax gains on a holding below 10%, which is what an ordinary portfolio position is, so India cannot tax it. India taxes only a stake of 10% or more under Article 14(5), or a company whose value sits mainly in Indian property. Article 14(6) is the catch-all, and Indian mutual fund units aren't shares in a company, so it should reach them too, though that part isn't settled. Where India does tax, the long-term rate is 12.5%. When you redeem, your broker or AMC withholds tax on the gain before paying you, often at a flat rate that runs ahead of what you actually owe once the ₹1.25 lakh long-term exemption and your holding period are applied. The over-withheld amount comes back through your Indian return.

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India-Denmark key facts: capital gains tax

Default non-resident TDS rate	12.5%
What the treaty changes here	It sets no lower rate on this income. What a treaty decides here is which country gets to tax it.
Treaty article / basis	Article 14(6), a holding below 10% of an Indian company is taxable only in Denmark
Your TRC issuing authority	Skattestyrelsen

Rates reflect India's domestic withholding under Section 393(2) (Section 195 until 31 March 2026) and the India-Denmark treaty. Surcharge and cess apply on top where relevant.

How it works on the India side

Indian capital-gains tax on equity and equity mutual funds follows Sections 198 and 196 (Sections 112A and 111A under the 1961 Act): long-term gains, held over a year, are taxed at 12.5% above a ₹1.25 lakh annual exemption, and short-term gains at 20%, after the Budget 2024 changes. For an NRI, the AMC or broker deducts TDS on the gain at redemption, and because they apply a flat rate without your annual exemption or the full holding-period detail, the deduction is frequently more than your real liability.

The correction happens on your return. You compute the gain properly across all your folios and brokers, apply the exemption and the right rate per holding period, and set the TDS already deducted against it. Where the TDS exceeded the actual tax, which is common once the exemption is applied, the excess is refunded. Two things catch people out: getting the cost basis right across multiple brokers, and the rule that a non-resident cannot set an unused basic exemption limit against these gains the way a resident can.

What changes because you live in Denmark

Denmark taxes residents on worldwide income, and Skattestyrelsen credits your Indian tax only up to the Danish tax on that same slice (ligningsloven 33). If any of it is mutual fund units, watch the timing: an open-ended fund that buys back units at NAV counts as an investeringsselskab, so Denmark taxes the NAV rise every year under lagerprincippet, unrealised gains included, while India taxes you only when you redeem. Denmark gives the credit in the year the income was earned, not the year you paid the Indian tax, so you have to get those older years reopened, and ordinary genoptagelse shuts on 1 May in the fourth year after the income year (skatteforvaltningsloven 26). Keep a flat in India for your own use and there is a second one: ejendomsværdiskat applies to homes outside Denmark too, and you work out and report the market value yourself.

Frequently asked questions

Common questions from Danish NRIs

It turns on what you hold and how large the stake is, not on where you live. Under Article 14(6) a holding below 10% is taxable only in Denmark, so India taxes nothing on an ordinary portfolio position. The same reasoning should cover Indian mutual fund units, though that part isn't settled law yet. On a stake of 10% or more in a listed company, India taxes long-term gains at 12.5% above a ₹1.25 lakh annual exemption and short-term gains at 20% (Sections 198 and 196, formerly 112A and 111A). An unlisted or property-rich company is taxed on a different footing, without that exemption. Any TDS your AMC over-withheld comes back on your Indian return.

Because the AMC can't see the size of your stake or your purchase dates, it withholds at the flat Indian rate as if India could tax the gain. On the positions where the India-Denmark treaty gives Denmark the sole taxing right, your correct Indian tax is nil, so the refund is the entire amount deducted rather than a top slice of it. You claim it by filing an Indian return with the treaty position and the evidence behind it, which means stake size or purchase dates per lot.

Go further

Read the full guide, or see your country's complete picture

NRI capital-gains ITR across multiple brokers Denmark NRI tax guide: every income type and the rates that apply

Capital Gains Tax sorted, by an Indian CA who works with Danish NRIs

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