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

No, not the mutual fund gains, and not your listed shares either unless you held a big stake. India taxes a non-resident on income that arises in India, but the India-Korea treaty can hand that right back to Korea. Its capital gains article, Article 14, taxes gains on Indian immovable property and on large shareholdings at source in India, but sends gains on any other Indian property, through its residual clause, to the country of residence alone. A mutual fund unit is not immovable property and not a company share, so it lands in that residual clause and is taxable only in Korea.

This is the same outcome a Singapore or Dubai resident gets, and the opposite of China. The India-China residual clause is source based, so a China resident's fund gains stay taxable in India. Korea's residual clause is residence based, so they do not. Your fund house will still deduct tax when you redeem, but that is a withholding you reclaim, not the final word.

The argument turns on one line of the treaty, and Korea's version is residence-only. A mutual fund unit is issued by a trust, not by a company, so in law a unit is not a share. In 2025 the Mumbai Tribunal used exactly this point in Anushka Sanjay Shah: for a Singapore resident, fund unit gains were not shares, so they fell into the India-Singapore residual clause, which taxes only in the country of residence, and nothing was payable in India.

The India-Korea residual clause reads the same way. It says gains from the alienation of any property, other than the property in the earlier paragraphs, are taxable only in the state of which the seller is a resident. So your fund units land in a box that hands the taxing right to Korea. The one case where India can still tax a share sale is a large stake: if you held 5 percent or more of the company's capital at any time in the 12 months before selling, Article 14 lets India tax that gain. Ordinary listed holdings sit well under 5 percent, so they stay in the residence-only residual clause alongside your fund units.

Inside your first five Korean years, the gain can escape both countries. Korea taxes a foreign national who has lived there five years or less of the last ten on foreign income only where it is paid in Korea or brought into Korea, under Article 3 of Korea's Income Tax Act. A capital gain on Indian units or small shareholdings is foreign income, so if you realise it and leave the money in your Indian account, Korea does not tax it during the window. India cannot tax it either, because the treaty gives that right to Korea. The gain is taxed in neither place.

That makes the window the time to realise Indian fund and small-share gains. Once you cross five of the last ten years, Korea taxes your worldwide income, so the same gain is then taxable in Korea under its own rules, up to Korea's rates plus the 10 percent local surtax. India still cannot tax it, so there is a single Korean tax and no Indian tax to set against it. We map that window in depth on our Korea five-year income page.

When India does tax, a holding over 5 percent or an Indian property, the rate depends on the asset and how long you held it:

These rates apply to sales on or after 23 July 2024. They matter when your shareholding is over the 5 percent line. Indian immovable property is different: a property gain is always taxable in India wherever you live, the buyer withholds TDS on the full sale price under Section 195, and a lower-deduction certificate, Form 13 under Section 197, now Form 128 under Section 395, is what frees the trapped cash. For an ordinary fund or small-share sale, none of this is your final cost, because the treaty keeps the gain in Korea.

Tax still comes out first, and you get it back. When you redeem Indian mutual fund units, the fund house deducts TDS on your gain under Section 195, which becomes Section 393(2) from FY 2026-27, and it cannot read the treaty for you. So the money lands short even though your final Indian tax on the gain is zero. Listed shares sold on the exchange usually settle without tax at source.

You put it right by filing an Indian return, ITR-2, showing the gain and claiming the treaty exemption, so the whole of the TDS comes back as a refund with interest. You support the claim with a Tax Residency Certificate from Korea's tax office and Form 10F, now Form 41 from FY 2026-27. If a redemption is large and you would rather not wait for the refund, a lower-deduction certificate under Section 197, now Form 128 under Section 395, before you redeem stops the TDS coming out in the first place.

Meera, 35, is a product manager in Seoul, three years into her posting, so well inside the five-year window. She redeems Indian equity mutual funds and books a long-term gain of ₹8 lakh, and she sells a small listed Indian shareholding, well under 5 percent of the company, for a short-term gain of ₹2 lakh.

The fund house deducts TDS on the redemption under Section 195, about ₹1 lakh. But Meera is a Korea resident, and the India-Korea treaty taxes both the unit gain and the sub-5 percent share gain only in Korea, so her Indian tax on them is zero. She files ITR-2 with her Korean Tax Residency Certificate and Form 10F, now Form 41, claims the exemption, and the entire ₹1 lakh of TDS comes back as a refund. Because she is inside her five-year window and leaves the proceeds in her Indian account, Korea does not tax the gains either, so they are taxed nowhere. Had she already crossed five years in Korea, Korea would tax the same gains under its own rules, but India still would not, so she would face a single Korean tax with no Indian tax on top.