Is it fair where NRIs pay zero tax on a 2 crore mutual fund profit, while Indians pay 25 lakhs. The secret behind this phenomenon is called DTAA, that is the Double Taxation Avoidance Agreement, and it will make you want to move out of India and I an not even kidding about this.
So in the last week, Mumbai's Income Tax Tribunal delivered a game-changing ruling where a Singapore based NRI challenged paying tax on her 1.35 crores mutual fund gains and won. Because of the DTAA between India and Singapore, she had to pay tax on this in Singapore, her tax domicile, and not India. But Singapore does not tax capital gains, so her tax liability basically became zero.
Now it is not so easy as you think as yku have to fulfill three conditions which need to be met for this.
First, you must live outside India for 182 plus days yearly to qualify as an NRI.
Second, this works only for mutual funds, not stocks.
Third, your residing country must have a DTAA with India in zero capital gains tax as that is the primary reason you will be getting the tax exempt.
Now if you ask me that this seems kinda shady, I will most likely agree as it does sound shady but that is how the law has been shaped in both countries.
