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

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-Canada 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-Canada treaty gives your units no such shelter. They are not shares, but the box they fall into still leaves India free to tax the gain, so moving them out of the share clause changes nothing. Claiming the Singapore result from Canada 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.

Canada taxes your worldwide gains, adding half of each gain to your income at your marginal rate (the proposed rise to two-thirds was cancelled in March 2025). You claim a foreign tax credit for the Indian tax.

Because both countries tax the same gain, the treaty stops it being taxed twice: Canada gives a credit for the Indian tax you paid, under Article 23. The credit only reaches up to the Canadian tax on that gain, so if the Indian tax is the higher of the two, the excess is money you recover in India through your return, not in Canada. Getting the Indian rate right from the start is what saves the cash-flow.

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 Canadian 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.

Arjun, an NRI in Toronto, 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. Arjun cannot move the fund gain out of Indian tax the way a Singapore resident could, because the India-Canada treaty lets India tax it. Canada taxes the same gains and gives a credit for the Indian tax under Article 23, so the total cost is the higher of the two sides, not the sum.