Last updated: 1 July 2025
Reading time: 9 mins
If you’re an NRI living in Dubai and investing in Indian mutual funds, you may be able to pay zero tax on those gains—legally. This guide explains the process, recent tribunal rulings, and includes a real-life refund case to illustrate how it works in practice.
👤 Author Box
Kashish Manjani, CFP®, CTEP — SEBI-Registered Investment Adviser (RIA XXXX)
Founder, Aikeyam Wealth | 7 years in NRI tax & investment planning
I’ve filed 80+ DTAA claims for Gulf-based clients. This guide condenses everything we’ve learned so you can DIY—or know exactly what to ask your CA.
Table of Contents
- Why the DTAA Unlocks 0% Tax
- Latest Tribunal Rulings (2023-25)
- How Much You Can Save
- Step-by-Step Compliance Checklist
- Real Case Study — ₹14 L Refund
- Common Pitfalls & Myths
- FAQs (2025 Filing Season)
- Conclusion & Next Steps
1 · Why the India–UAE DTAA Unlocks 0% Tax
The Double Taxation Avoidance Agreement (DTAA) signed in 1993 allocates taxing rights between India and the UAE. Article 13(5) says that capital gains from “other assets” are taxable only in the investor’s country of residence.
Because the UAE charges no personal income or capital-gains tax, your Indian mutual-fund gains become tax-free everywhere—provided you can prove UAE residency.
| Asset Type | Taxing Right Under DTAA | Tax in India | Tax in UAE |
|---|---|---|---|
| Indian Property | India | ✅ Yes | ❌ No |
| Indian Shares | India | ✅ Yes | ❌ No |
| Indian Mutual Funds | UAE (country of residence) | ❌ No | ❌ No |
Key takeaway: Mutual-fund units are not classified as “shares”, so they slot into the “other-assets” basket.
2 · Latest Tribunal Rulings You Should Know
- Anushka Sanjay Shah vs ITO (Mumbai ITAT, Feb 2025) — Confirmed that mutual-fund units fall under “other assets”; India cannot tax gains if the NRI is UAE-resident.
- ITO vs Mohamed Ali Saeed (Chennai ITAT, Aug 2024) — TDS refund granted as proof of UAE residency satisfied Article 13(5).
These decisions give NRIs confidence to claim refunds on TDS already deducted by fund houses.
3 · How Much Tax Can You Save?
| Mutual-Fund Type | Tax Without DTAA | Tax With DTAA (TRC filed) |
|---|---|---|
| Equity MF (LTCG > ₹1.25 L) | 12.5 % | 0 % |
| Equity MF (STCG) | 15–20 % | 0 % |
| Debt MF (any duration) | 30 % | 0 % |
Example: On a ₹1 crore gain in a debt fund, the DTAA route can legally save you ₹30 lakh.
4 · Step-by-Step Compliance Checklist
| Step | What to Do | Evidence / Tip |
|---|---|---|
| 1. Obtain UAE TRC | Apply via UAE MoF; costs ~₹45,000 | |
| 2. Fill Form 10F | Mandatory declaration | Attach to ITR-2 |
| 3. File ITR-2 | Report gains, claim Section 90 relief | Select DTAA > India-UAE |
| 4. Claim TDS Refund | Use Schedule TR; enter TDS deducted by AMC | Processing ~90 days |
| 5. Store Docs | Keep TRC, passport, fund statements for 8 yrs | For scrutiny |
Timing tip: UAE’s tax year is Jan–Dec, India’s is Apr–Mar. Ensure your TRC covers the Indian FY in which you sold the units.
5 · Case Study: ₹14 L Refund for a Dubai-Based Engineer
| Detail | Data |
|---|---|
| Client | “Rahul”, 37, Senior DevOps Engineer |
| Portfolio sold | ₹3.2 crore across 5 equity funds |
| Sale date | 22 Feb 2025 |
| TDS deducted | ₹14,23,600 |
| Documents | UAE TRC 2025, Form 10F, ITR-2, passport |
| Result | Full refund credited on 29 May 2025 (97 days) |
Screenshots
6 · Common Pitfalls & Myths
- “I can skip filing because tax is zero.” Wrong—file ITR-2 or your refund won’t arrive.
- “TDS won’t be deducted if I submit TRC to AMC.” Most AMCs still auto-deduct; assume you’ll claim it back.
- “Joint units = automatic exemption.” Both holders need UAE TRCs.
- “Small gains are worth claiming.” If gains < ₹5 lakh, TRC cost may outweigh savings.
7 · FAQs (2025 Filing Season)
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FAQs: Dubai NRI Mutual Fund Taxation 2025
Q1: Are all mutual fund capital gains tax-free for Dubai NRIs?
A1: Only capital gains from mutual funds (classified as “other assets”) are exempt under DTAA. Gains from Indian shares or property sales remain taxable in India.
Q2: What documents do I need to claim this exemption?
A2: Annual UAE Tax Residency Certificate (TRC), Indian Income Tax Return (ITR-2), and Form 10F.
Q3: Can I avoid TDS on mutual fund gains upfront?
A3: No. TDS is deducted at source. You can claim a refund by filing your tax return with TRC.
Q4: What if mutual fund units are held in my spouse’s name?
A4: If your spouse cannot obtain a UAE TRC due to lack of income proof, claiming exemption may be difficult.
Q5: Does this apply to NRIs in countries other than UAE?
A5: Similar DTAA provisions exist with Singapore and Mauritius, but details vary by treaty.
8 · Conclusion & Next Steps
Using the India-UAE DTAA to claim 0 % tax on mutual-fund gains is one of the most powerful, fully legal tactics for Dubai NRIs. But it only works if you:
- Prove UAE residency (TRC) every year.
- File ITR-2 correctly and on time.
- Keep impeccable records.