Are your Indian mutual fund gains taxable in India if you live in the UAE?

Under the India-UAE treaty, capital gains are in Article 13. Since the 2007 protocol, India can tax gains on shares of an Indian company under Article 13(4). Gains on any other property fall under Article 13(5), which gives the right to tax only to the country of residence, the UAE.

Mutual fund units are not shares. An Indian mutual fund is a trust and a unit is issued by the trust, not by a company, so a unit and a share are different securities in law. Units are therefore outside Article 13(4) and inside Article 13(5), so a UAE resident's fund gain is taxable only in the UAE. The UAE levies no personal capital-gains tax, so nothing is due in either country. It is enough that the UAE has the right to tax you, you do not have to show you actually paid tax there.

A Delhi Tribunal decision in 2024, in the case of Saket Kanoi, held that a UAE resident's gains on Indian debt mutual funds were not taxable in India, because units fall under Article 13(5), and that the treaty benefit does not require proof of tax actually paid in the UAE, the right to tax is enough.

As with Singapore, this is a Tribunal decision, not a High Court or Supreme Court ruling, and the department can appeal. The India-UAE treaty also carries a limitation-of-benefits clause, and the general anti-avoidance rules still apply, so the claim depends on your being a genuine UAE resident, not a person routing through the UAE to avoid tax. Treat it as a strong position that needs clean residency and paperwork, not an automatic exemption.

The logic covers units, not direct shares. Gains on actual shares of an Indian company stay taxable in India under Article 13(4). The exemption is for fund units, equity or debt.

The fund house deducts TDS on redemption under Section 195 (Section 393 from FY 2026-27), because it cannot apply a treaty position at source. You claim the exemption in an Indian return, ITR-2, showing the Article 13(5) position, and recover the TDS as a refund, supported by a Tax Residency Certificate from the UAE and Form 10F (Form 41 from FY 2026-27). For a large redemption, a lower or nil deduction certificate under Section 197 (Section 395) before you sell avoids the wait.

Imran, a Dubai resident, redeems Indian mutual funds with a gain of fifty lakh rupees. The fund house deducts TDS, so he receives less than the full proceeds.

He files an Indian return claiming the gain is taxable only in the UAE under Article 13(5), with his UAE Tax Residency Certificate and Form 10F, and the TDS comes back as a refund. He does not have to prove he paid any UAE tax, because the treaty only requires that the UAE has the right to tax him. Had he sold direct shares of an Indian company instead, that gain would have remained taxable in India.