Are your Indian share and mutual fund gains taxable in India if you live in Bangladesh?

Yes, on both. India taxes a non-resident on gains that arise in India, and a gain on an Indian share or a mutual fund unit arises in India. The India-Bangladesh treaty does not take that right away, so whether you sell direct shares or redeem fund units, India keeps the right to tax the gain.

This is the opposite of a Singapore or Dubai resident, whose treaty makes fund-unit gains taxable only in the country of residence. Yours does not, so the escape route that works from Singapore is closed here. Your fund house and broker are right to treat the gain as taxable in India.

The units-are-not-shares point is correct in law but it does not help you here, because of where the units land. A fund unit is issued by a trust, not a company, so it is not a share, exactly as the Mumbai Tribunal held for a Singapore resident in Anushka Sanjay Shah. That case worked because the India-Singapore residual clause is residence-only, so Singapore alone could tax the gain.

The India-Bangladesh treaty gives your units no such shelter. They are not shares, but that does not put them beyond India's reach, so moving them out of the share clause changes nothing. Claiming the Singapore result from Bangladesh is the mistake that leads to a demand with interest later.

The Indian tax depends on what you sold. The three common cases:

The 12.5% long-term rate and the 20% short-term rate apply to sales on or after 23 July 2024, and the Rs 1.25 lakh yearly exemption is available to you as an NRI. There is no indexation and no currency-fluctuation relief on fund gains.

Bangladesh does not tax these gains at all. Under this older situs-based treaty, a gain on an asset situated in India is India's to tax alone, and an Indian mutual fund unit or Indian share is Indian-situated, so Bangladesh cannot reach it. Bangladesh is not a signatory to the multilateral instrument, so its capital-gains rule is unmodified; that situs rule, not a residence-only residual clause, is what governs, and it points every India-situated gain back to India.

So there is no double tax to relieve here: the treaty gives India the exclusive right to tax these gains, so the Indian tax is the only tax on them, and there is nothing to credit anywhere.

Tax often comes out before the right rate is applied. When you redeem Indian mutual fund units, the fund house deducts TDS under Section 195, which becomes Section 393(2) from FY 2026-27, and it cannot apply your final rate or your Rs 1.25 lakh exemption for you. Listed shares sold on the exchange are usually settled without tax at source, so there you pay through your return instead.

You set it right by filing an Indian return, ITR-2, at the correct 12.5%, 20% or slab rate, and any TDS over-deducted comes back as a refund with interest. You support it with your Bangladeshi Tax Residency Certificate and Form 10F, now Form 41. For a large redemption, a lower-deduction certificate, Form 13 under Section 197, now Form 128 under Section 395, keeps the withholding down from the start.

Rahul, an NRI in Dhaka, redeems Indian equity mutual funds and books a long-term gain of Rs 8 lakh, and also sells listed Indian shares held eight months for a short-term gain of Rs 2 lakh.

On the funds, India taxes the gain above the Rs 1.25 lakh exemption, so Rs 6.75 lakh at 12.5% under Section 112A, about Rs 84,375. On the shares, the Rs 2 lakh short-term gain is taxed at 20% under Section 111A, Rs 40,000. Rahul cannot move the fund gain out of Indian tax the way a Singapore resident could, because the India-Bangladesh treaty lets India tax it. Bangladesh cannot tax these gains at all, because the treaty gives India the exclusive right to a gain on India-situated assets, so India's tax is the whole cost, with nothing to credit.