Indian shares and mutual funds when you are a Vietnamese tax resident

This corridor does not give the relief some others do. In India, your gains on Indian shares are taxable, listed equity long-term gains at 12.5% over the ₹1.25 lakh exemption if held more than a year, and short-term gains at 20%, with the broker or fund house deducting TDS under Section 195.

The treaty does not take that away. Unlike the India-Singapore and India-UAE treaties, which make share gains taxable only in the country of residence, the India-Vietnam treaty expressly lets India tax gains on shares of an Indian company. So a Vietnamese resident cannot claim their Indian share gains out of Indian tax the way a Dubai or Singapore resident can. India keeps its right to tax the gain, and the TDS is a real tax, not something to reclaim.

Vietnam then taxes the same sale, but in its own way. For an individual, a securities transfer is taxed at 0.1% of the sale price, not the gain. That is a small rate, but it is charged on the gross proceeds every time you sell, whether you made a profit or a loss, which is unusual.

The problem is that the two taxes are built on different foundations: India taxes a percentage of your gain, Vietnam taxes a fraction of your sale proceeds. A credit works by setting one country's tax against the other's on the same income, but here the bases barely overlap, so the credit gives little relief in either direction, and you can end up genuinely paying both, India's tax on the gain and Vietnam's 0.1% on the proceeds. Neither is large on its own, but they do not neutralise each other the way a clean credit would.

There is one nuance worth knowing for mutual funds. A fund unit is a unit in a trust, not a share in a company, and on that basis it can be argued to fall in the treaty's residual category, which is taxable only in Vietnam, your country of residence. If that holds, India would have no right to tax the fund gain and the TDS would be recoverable. But this is a contested position, India still applies its domestic tax to the redemption, so it is not a safe assumption to bank on, and a claim would have to be made and defended.

So the India-side work is to compute the Indian tax correctly, secure the treaty rate where it genuinely applies, and, for fund units, take a considered view on whether the residual-category argument is worth pursuing in your case. A practising CA works the Indian gain and TDS, tests the mutual-fund position rather than assuming it, and gives your Vietnamese accountant the figures for the 0.1% and any credit.