Your Indian mutual fund gains may owe no tax in India. One UAE certificate makes it real.

The India-UAE treaty assigns mutual fund capital gains to the UAE alone — rate: zero. Three tribunal rulings, the AED 1,050 certificate, the break-even math, and how to claim it.

When an NRI redeems an Indian mutual fund, the fund house deducts tax before the money reaches the account: 12.5% on long-term equity gains, 20% on short-term, 30% on debt funds, plus the 4% “health and education” levy (the cess) stacked on top. Most of us treat that as the cost of investing back home.

Here is what the India-UAE tax treaty actually says: if you are a UAE tax resident, capital gains on Indian mutual fund units belong only to the UAE. And the UAE taxes personal investment gains at zero. Not a lower rate in India — no Indian tax on those gains at all.

This is not a loophole someone found on a forum. Three tax tribunals have now confirmed it, going back to 2019 — most recently for a UAE resident specifically, on ₹1.54 crore of gains. What stands between you and the exemption is one certificate from the UAE tax authority, a form on the Indian tax portal, and knowing whether your gains are big enough to make the paperwork worth it. This issue covers all three.

What the treaty says, in plain words

India’s tax treaty with the UAE (in force since 1993) has an article, Article 13, that decides which country gets to tax your capital gains. It splits your assets into buckets:

You sell	Who can tax the gain
Property in India (flat, plot)	India
Shares of an Indian company (your demat stocks)	India
Anything else — including mutual fund units	Only your country of residence

That last line is the whole story. In 2007 India amended the treaty to keep taxing rights over shares. But mutual fund units are not shares. Indian mutual funds are set up as trusts, not companies; a unit is a trust security. So units fall into “anything else”, and “anything else” is taxable only where you live. If you live in the UAE, that means a 0% rate.

The tax department did fight this. In the Saket Kanoi case (Delhi tribunal, 23 October 2024), the assessing officer denied the exemption on ₹1,54,01,166 of debt fund gains, arguing among other things that a UAE resident pays no income tax there and so deserves no treaty relief. The tribunal rejected that, leaning on a 2003 Supreme Court ruling: what matters is that the UAE has the right to tax you, not whether it actually does. The appeal was allowed in full.

This wasn’t the first time the point was tested for a UAE resident, either. A Cochin tribunal reached the identical conclusion in 2019 (K.E. Faizal), and in March 2025 the Mumbai tribunal applied the same reasoning for an NRI in Singapore, on both equity and debt fund gains. The tribunals note that India’s treaties with Singapore, the UAE and Switzerland word this residual clause in much the same way, which is why the same argument keeps winning across benches and years. The exemption applies to equity funds, debt funds, gold funds, international funds — the trust structure, not the portfolio inside, is what decides.

One correction to something I wrote on July 6: in the NRO piece I said the treaty doesn’t help with capital gains. For your demat shares, that is still true — India keeps those. For mutual fund units, the tribunals have now made clear it is not. I’ve added an update note to that post.

First, be a UAE resident where it counts

The treaty defines a UAE resident as an individual present in the UAE at least 183 days in the calendar year. If you live and work here full-time, you clear it without trying. If you split the year across countries, count before you claim.

Two clocks have to agree:

UAE side: 183+ days here. This is what the Tax Residency Certificate attests.
India side: you must NOT be an Indian tax resident that year. The usual limit is 182 days in India, but it drops to 120 if your taxable India income crosses ₹15 lakh, and a big redemption can put you over that line. I covered the full day-count ladder in the July 12 issue; if you’re planning both a large redemption and a long India stay in the same year, read that first.

Does it matter if you invested via NRE or NRO?

No. The exemption depends on who you are (a UAE tax resident) and what you sold (mutual fund units) — not on which account funded the purchase. Whether you bought the units with money sent from the UAE through an NRE account, or with money already sitting in India through an NRO account (rent, a maturing FD, old salary), the fund house applies the same tax treatment and the same treaty exemption on the way out.

What NRE and NRO change is what happens to the sale proceeds afterward, not the tax on the sale itself. Money in an NRE account is freely repatriable to the UAE. Money in an NRO account is capped at USD 1 million a year when you move it out, and needs a chartered accountant’s certificate (Form 15CB) alongside your own declaration (Form 15CA). If you’re planning to bring the proceeds back to the UAE, that repatriation paperwork sits on top of everything below — a separate step, not a substitute for it.

What it saves, in numbers

Say you’re rebalancing and redeem equity funds with ₹20 lakh of long-term gains (roughly AED 76,300). The Indian bill without the treaty: 12.5% on gains above the ₹1.25 lakh exempt slice, plus 4% cess: (₹20,00,000 − ₹1,25,000) × 13% = ₹2,43,750, about AED 9,300. With the treaty: zero.

The gap is bigger with debt funds. Fund houses deduct a flat 30% TDS on debt fund gains for NRIs regardless of holding period, plus cess: 31.2% in total. On ₹10 lakh of debt fund gains the bill is ₹3,12,000, about AED 11,900. With the treaty: zero. (Very large gains attract a surcharge on top, which only widens the gap.)

When the certificate pays for itself

The Tax Residency Certificate (TRC) from the UAE’s Federal Tax Authority costs AED 1,050 for a salaried individual: AED 50 to apply plus AED 1,000 for the certificate (AED 550 total if you’re registered for UAE corporate tax, which most employees are not). That’s about ₹27,500. It covers a 12-month period and must be taken fresh for each year you claim.

So the question is simply: does the Indian tax on this year’s redemptions exceed ₹27,500? Worked backwards, the certificate pays for itself once your gains in one financial year cross roughly:

Your gains are from	Indian tax rate (with cess)	Break-even gains
Equity funds, held >1 year	13% above ₹1.25 lakh exempt	~₹3.4 lakh (≈ AED 12,800)
Equity funds, held ≤1 year	20.8%	~₹1.3 lakh (≈ AED 5,000)
Debt / gold / international funds	flat 31.2% TDS	~₹88,000 (≈ AED 3,400)

(These are my arithmetic from the rates above, not official thresholds. If a CA files your Indian return, add their fee to the cost side; if you file anyway, the TRC is the only extra cost.)

Below those numbers, skip it, especially on long-term equity gains under ₹1.25 lakh, where India charges you nothing anyway. Above them, every additional rupee of gain is taxed at 13–31% or at zero depending on whether you did the paperwork.

One planning point that falls out of this: gains are taxed in the year you redeem, not as they accrue. Your SIPs can compound untouched for years with no TRC needed. When you eventually sell — rebalancing, a property purchase, moving money out — that is the year the certificate matters. Bunching redemptions into one year means one TRC covers the lot, instead of paying for a certificate in three separate years.

How to get the TRC

Apply on the FTA’s EmaraTax portal (trc.tax.gov.ae), fully online, no agent needed:

Register on EmaraTax (UAE Pass works) and open the Tax Residency Certificate service.
Choose the certificate for treaty purposes (it will ask which treaty; pick India) and select the 12-month period. You cannot request a future period.
Upload: passport copy, Emirates ID and residence visa, the entry/exit report from the Federal Authority for Identity and Citizenship (downloadable via the ICP/GDRFA app; this is what proves your 183 days), proof of residence (Ejari tenancy or title deed), and a salary certificate or other proof of UAE income.
Pay AED 50, and AED 1,000 once approved. Processing takes about 5 business days; the certificate arrives digitally.

How to use it

Before you redeem (the clean path). Send the fund house or its registrar (CAMS or KFintech; their NRI service desks handle this) four things: the TRC, the treaty declaration filed on the Indian tax portal (Form 10F as everyone still calls it; under the new Income-tax Act it is Form 41 from FY2026-27, filed under e-File → Income Tax Forms), a short self-declaration that you’re a UAE resident claiming Article 13(5) and the beneficial owner, and a declaration that you have no permanent establishment in India. Lodged before the redemption, the registrar can deduct nil tax at source. Do this a couple of weeks ahead, not the day before.

At return time (the catch-up path). If tax was already deducted — some fund houses deduct regardless and let you reclaim — file your Indian return (ITR-2 for most NRIs), report the gains, claim the exemption under the treaty, and take the refund. The return for a financial year is due by July 31 of the following year. Note the form quirk: a claim for FY2025-26, due this month, still uses old Form 10F; from FY2026-27 it’s Form 41.

Either way, file the Indian return and keep the TRC for the year. The exemption is claimed, not automatic: an unclaimed treaty right saves you nothing, and a claimed one needs the certificate behind it if the department asks.

What can go wrong

These are tribunal rulings, not a Supreme Court judgment. The tax department can and does keep litigating; a future bench could differ. Today the rulings are consistent across benches and squarely cover the UAE, but “settled beyond appeal” would be overstating it.
India has amended this treaty before: the 2007 change is precisely how demat shares got carved out. A future amendment could do the same to units, prospectively. Use the exemption while it exists; don’t assume it is permanent.
The claim stands on real residency. 183 actual days in the UAE, an entry/exit report that shows it, and non-resident status in India. Engineering a certificate you don’t genuinely qualify for is how treaty claims turn into penalty cases. (India’s general anti-avoidance rules kick in only above ₹3 crore of tax benefit; far beyond a typical individual’s numbers, but very large moves do get looked at.)
Direct equity in your demat account stays taxable in India. So does property. This covers mutual fund units; that’s where a lot of NRI money sits, but not all of it.

If your redemptions this year are small, keep this for the year you actually sell. If you’re sitting on lakhs of accumulated gains and planning to sell, the UAE side of your life already qualifies you for a 0% rate. AED 1,050 and two forms are what make it stick.

TRC fees, tax rates and the ₹26.2/AED conversion used here are current as of 20 July 2026; recheck all three before acting. This is framing, not tax advice; for large redemptions, involve a CA who handles NRI treaty claims.