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

Your direct company shares, yes. Your fund units, no. India taxes a non-resident on gains that arise in India, and Article 13 of the India-Malta treaty keeps India's right to tax your Indian company-share gains. But the residual gains clause, Article 13(5), is residence-only. A mutual fund unit is issued by a trust, not by a company, so it is not a share, and it drops into that residence-only residual clause. So your fund-unit gain is taxable only in Malta, not in India.

This is the same outcome a Singapore or Dubai resident gets on fund units, and the opposite of what a China resident gets. The dividing line is the wording of one clause, which is why it has to be checked treaty by treaty and not assumed.

The units-are-not-shares point turns on the wording of the residual clause, and this treaty's wording helps you. In 2025 the Mumbai Tribunal used the point in Anushka Sanjay Shah: a fund unit is not a company share, so a unit gain falls in the residual clause. Because this treaty's residual clause is residence-only, that clause taxes the gain only in the country of residence.

So the argument does two things here. It moves your unit gain out of the taxable share clause, and the box it lands in, the residence-only residual, is one India cannot tax. Keep the distinction clean: this works for fund units, not for direct company shares, which stay taxable in India under Article 13.

The split is what matters, so keep the two apart. India taxes only your direct company shares; your fund units carry no Indian tax.

The 12.5% and 20% share rates apply to sales on or after 23 July 2024, and the Rs 1.25 lakh yearly exemption is available to you as an NRI on the share gains. The fund units carry no Indian tax under the treaty, so there is nothing to compute in India on them.

Malta does not tax a resident's foreign capital gains at all, not even when the money is brought into Malta, so it does not tax the unit gain either. The unit gain is taxed nowhere: exempt in India under the treaty and untaxed in Malta. Two caveats for Malta. The treaty is covered by the multilateral instrument, so its Principal Purpose Test can deny the benefit for an arrangement set up mainly to obtain it, meaning the residence has to be genuine. And Malta charges a minimum tax of about 5,000 euro a year once your foreign income reaches 35,000 euro.

So the planning point is simple: your fund units are taxed nowhere, so the only thing to get right is to stop the Indian side withholding on the redemption in the first place. Your direct Indian company shares are taxable in India, and Malta does not tax them either, so the Indian tax on the shares is the whole cost, with nothing to credit anywhere.

On your direct Indian shares, tax comes out under Section 195, which becomes Section 393(2) from FY 2026-27, and you true it up on an Indian return, ITR-2. On your fund units, the aim is different: because the treaty exempts the unit gain in India, you want the fund house not to withhold, so you give it your Maltese Tax Residency Certificate and Form 10F, now Form 41, and claim the Article 13 exemption. If tax is still deducted, you reclaim it in full through the return. A lower or nil deduction certificate, Form 13 under Section 197, now Form 128 under Section 395, before a large redemption is the clean way to stop the withholding up front.

Deepak, an NRI in Valletta, redeems Indian equity mutual funds and books a gain of Rs 8 lakh, and separately sells listed Indian shares held nine months for a short-term gain of Rs 2 lakh.

On the fund units, the treaty makes the gain taxable only in Malta, and Malta does not tax it, so the Rs 8 lakh is tax-free: nothing in India, nothing in Malta. Deepak files the Maltese TRC and Form 10F so the fund house does not withhold, or reclaims it if it does. On the direct shares, the Rs 2 lakh short-term gain is taxable in India at 20% under Section 111A, Rs 40,000, and Malta does not tax it either, so that Rs 40,000 is the whole cost. So the fund gain is tax-free and the share gain is taxed only in India.