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

It splits by what you sold. Direct shares in an Indian company are taxable in India: the India-Indonesia treaty, in Article 13(5), lets India tax gains on shares of a company resident in India. But Indian mutual fund units are not. They fall into the treaty's residual clause, Article 13(6), which makes the gain taxable only in your country of residence, Indonesia. So a fund redemption is outside Indian tax, while a direct share sale is not.

That means the units-are-not-shares escape that helps Singapore and Dubai residents also helps you from Indonesia. It is the opposite of China, where the same residual clause is source-based and India taxes both, set out on our Indian share and fund gains from China page. Your fund house may still deduct tax at source on a redemption, but for units that is recoverable in full, because the treaty leaves the gain to Indonesia alone.

The split comes straight from how Article 13 is built. Paragraph 5 covers gains on shares of a company resident in India and lets India tax them. A mutual fund unit is issued by a trust, not a company, so in law a unit is not a share. In March 2025 the Mumbai Tribunal made exactly this point in Anushka Sanjay Shah: fund units are not shares, so they do not fall in the share paragraph and instead land in the residual paragraph.

Article 13(6), the residual paragraph, reads that gains on any property other than that in the earlier paragraphs are taxable only in the State of which the seller is a resident. For an Indonesian resident that is Indonesia, so India cannot tax the unit gain. The same wording sits in the India-Singapore, India-UAE and India-Switzerland treaties, and the tribunals have read all of them the same way. Direct company shares never reach this paragraph, because Paragraph 5 catches them first and hands the taxing right to India.

If you are on Indonesia's four-year expert scheme, think before you claim the treaty on a fund gain. A qualifying listed-skill foreign worker is taxed only on Indonesian-source income for the first four years, so an Indian capital gain, being foreign-source, sits outside the Indonesian net during that window whatever it is. The catch is the scheme's own condition: it holds only while you do not use the tax treaty on foreign income. Claiming the India-Indonesia treaty to knock out the Indian tax on your fund units is exactly that, and it ends the shelter from that year, so Indonesia then taxes your whole worldwide income.

So during the shelter you face a trade. Keep it, and India still taxes the fund gain under its own law, because you did not invoke the treaty, while Indonesia ignores it. Break it to make the fund gain India-free, and you hand Indonesia the right to tax everything you earn worldwide for the rest of the four years. For a one-off gain that is rarely worth it. Often the cleaner move is to time the sale for after the shelter ends, when you are an ordinary resident and can use the treaty freely. A practising CA prices both before you file anything.

When India does tax a gain, on your direct shares, or on fund units in a year you do not claim the treaty, the rate depends on the asset.

The 12.5% long-term rate and the 20% short-term rate apply to sales on or after 23 July 2024, and the ₹1.25 lakh yearly exemption is available to you as an NRI. There is no indexation and no currency relief. Debt funds bought on or after 1 April 2023 that hold more than 65% in debt are always taxed at your slab rate as short-term, whatever the holding period.

Tax often comes out before the treaty is applied, so the fix is a filing. When you redeem Indian mutual fund units, the fund house deducts TDS on the gain under Section 195, which becomes Section 393(2) from FY 2026-27, and it cannot apply the treaty for you. You reclaim it by filing an Indian return, ITR-2, that shows the unit gain as taxable only in Indonesia under Article 13(6), and the whole TDS comes back as a refund with interest. You support that with a Tax Residency Certificate from the Indonesian tax office, its SKD, and Form 10F, which becomes Form 41 from FY 2026-27.

If the redemption is large and you would rather not park cash in a refund, get a nil or lower deduction certificate first. That is Form 13 under Section 197, which becomes Form 128 under Section 395 from FY 2026-27, and it tells the fund house to deduct little or nothing up front. For direct shares, which India can tax, you instead pay the right 12.5% or 20% and let your Indonesian accountant credit it under Article 23.

Meera, an NRI in Jakarta and an ordinary Indonesian resident, redeems Indian equity mutual funds for a long-term gain of ₹9 lakh, and sells listed Indian shares held 14 months for a long-term gain of ₹4 lakh.

On the fund units, the India-Indonesia treaty puts the gain in the residual Article 13(6), taxable only in Indonesia, so India taxes none of the ₹9 lakh. The fund house still deducts TDS on the redemption, which Meera reclaims in full on her ITR-2 with her Indonesian TRC and Form 10F, now Form 41. On the direct shares, Article 13(5) lets India tax the gain: ₹4 lakh less the ₹1.25 lakh exemption is ₹2.75 lakh, taxed at 12.5% under Section 112A, about ₹34,375 before the 4% cess. Indonesia then folds the share gain into her worldwide income and credits that Indian tax under Article 23.

So her Indian cost is roughly ₹34,375 on the shares and nothing on the funds. A China resident with the same two sales would pay Indian tax on both, because that treaty's residual clause is source-based. Had Meera been in her first four expert-scheme years, claiming the treaty to free the fund gain would have ended the shelter, so a CA would have priced holding the sale instead.