Taxation for Indian Mutual Fund gains in UK.

Hi, I'm investing in Indian mutual funds since Yr. 2006, and these mutual funds are for Indian nationals and /or NRI (non-resident Indians) only. I'm an OCI (Overseas Citizen of India) card holder and hold UK citizenship as well. Now I have redeemed some of these mutual funds so I would like to know whether the profit earned from these mutual funds will be treated as Capital gains or income in the UK.

Hi,

These would be treated as capital gains in the UK.

Thank you.

A follow on question-When a Non resident Indian (NRI) earns the capital gain from the mutual fund investment in India, they paycapital gain tax in India with different rates depending on investment type and holding duration. Since UK allows £12500 of capital gain tax free allowance for its residents, please help with following queries Q#1 can a UK tax resident gets a tax credit in UK for the capital gain tax paid in india Q#2 If Yes, can this tax credit be used for offsetting income tax in UK

Hi,

You will need to work out if there is Capital Gains Tax to pay in the UK by converting the buying costs, selling costs and expenses into pounds sterling, using the official currency exchange rates at the time time of purchase and disposal.  

Exchange rates from HMRC in CSV and XML format

If a gain arises, you can deduct £12300 from the gain and if there is still an amount chargeable, you will need to work out whether the lower rate or the higher rate of Capital Gains Tax applies.  

You can find a calculator here:

Tax when you sell property

Thank you.

Thank you for the reply. I understand that If Capital gain in India is less than £12300 equivalent, I pay no capital gain tax in the UK but, I still pay capital gain tax in India. My question is whether the tax paid in India can be taken as credit in the UK self assessments?

Hi, similar query, can this be re-confirmed if gains from mutual funds in India are taxed under capital gain and not as foreign income and taxed under applicable highest rate of tax ?

Hi nvsnl,

You can claim Foreign Tax Credit Relief if there is UK tax to pay on the same thing in order to reduce your UK tax bill. If you have worked out there is no capital gain to pay in the UK then you canot claim for the tax paid in India.

Thank you.

Hi,

When selling an offshore fund classified as an HMRC reporting fund, any gain upon sale will be subject to tax as a Capital Gains.  The Capital Gains rates of tax for mutual funds is the lower rate of 10% and the higher rate of 20%.

Thank you.