How to report Indian Mutual Fund gains in UK Self Assessment Tax return

I am a UK citizen and I also have Overseas Citizen of India (OCI) card. I hold Non resident savings Bank account in Indian Banks. I have invested in Indian Mutual Funds through this account. These Mutual Funds are meant for Indian nationals and/or non resident Indians only. My query is if I receive any profit (gain) by selling these Mutual Funds, can I treat them as capital gains in my UK self assessment tax return? Please advise.

Hi,

If you are resident in the UK at the time of the disposal, then they would be subject to UK Capital Gains Tax.

If the gain exceeds the annual exempt allowance, this gain would be declared either using the online Capital Gains Tax service or in the foreign page of the Self Assessment tax return.  

You may also be able to claim relief for tax paid in another country.

Thank you.

Please could HMRC confirm that above is applicable for Indian Mutual Funds as I understand Indian Mutual funds are "Non Reporting", therefore any income upon disposal is likely to be treated as "Global income" and will be taxed in UK according to tax tiers.

Hi
Income from non reporting funds is only taxable on the amount actually distributed to you.
If the company falls under non reporting funds then you will be taxed on whatever your highest rate of tax is.
Thankyou.
Regards. 

Thanks - still not clear. In SA106 form, overseas savings interest, dividends, pension and rental from foreign properties are all very clear. When it comes to non-reporting funds in India and CGT's that arise and taxable in India based on indexations - how is that captured in UK? as additional income (clubbed along with savings and dividends) or as capital gains (and therefore under the purview of capital gains annual exempt allowance)

hello @HMRC Admin10 I have a similar situation. My non-reporting funds do not distribute any of their earnings. So the net asset value of my units increases as time goes by. After disposing my fund holdings, I end up with a profit(a capital gain, effectively). Please could HMRC clarify whether UK capital gains allowance would apply to this profit? Or would it be considered as a simple 'foreign earning' and taxed at my highest income tax rate?

Hi,

It will be declared as Capital Gains. As you will also need to show this on the Capital Gains page, this will then be covered by the annual allowance so no extra charge will be applied.

Thank you.

Hi,

The main effect for UK investors who have invested in non-reporting funds, as opposed to reporting funds, is that on disposal of their interests they will be liable to tax on any gain arising as if it were income (that is, an offshore income gain, or ‘OIG’) instead of as a capital gain.  

IFM12300 - Offshore Funds: introduction: non-reporting funds

There are certain exeptions to this. Further guidance can be found here:

IFM13400 - Offshore Funds: participants in offshore funds: the charge to tax on disposal of an interest in a non-reporting fund

Thank you.

Dear Sirs, I had a mutual fund which matured in 2022. The £8000, maturity value from the disposal was placed in a non resident Indian bank account in India where it still sits. The bank has emailed me to provide a self declaration under the Indian Income Tax Act, FATCA/CRS otherwise I will be liable for any charges that are levied on them by the government. I wasn't intending to submit a tax return as I am PAYE and the amount of £8000 falls within the CGTA for 2022/23. I am unsure what I need to provide to my Indian bank to satisfy them that I have declared this income. Your guidance would be greatly appreciated.

Hi,

You would need to ask the Indian authorities what evidence they actually require.

Thank you.

Hi. I have similar queries as above re how to treat income/dividend payments made by Indian “non-reporting” mutual funds and capital gains made on the sale of such funds. The reply by HMRC Admin 19 states “If you are resident in the UK at the time of the disposal, then they would be subject to UK Capital Gains Tax.” and that the annual capital gain exempt allowance could be offset, implying that any excess gain would be taxed at the CGT rates. A subsequent response by HMRC Admin 32 also suggests (in response that “profit on sale of a fund will “be declared as Capital Gains. As you will also need to show this on the Capital Gains page, this will then be covered by the annual allowance so no extra charge [presumably if the gains are less than the annual CGT exemption value?] will be applied”. However, HMRC Admin 32’s next response after that states “on disposal of their interests they will be liable to tax on any gain arising as if it were INCOME (that is, an offshore income gain, or ‘OIG’) instead of as a capital gain.” This is confusing and seems to contradict HMRC Admin 19 and the initial response of HMRC Admin 32. Can this be clarified please?