ANATH

Further to my post on 25/10/2023, I am still unclear on how to treat gains and losses made on the sale of Indian “non-reporting” mutual funds. 1. I understand that: (a) such gains (which are treated as capital gains in India) are treated and taxed as income in the UK because HMRC does not treat the gains as capital gains; (b) capital losses on the sale of Indian “non-reporting” mutual funds cannot in the UK be offset against the gains on the sale of other Indian “non-reporting” mutual funds because the gains are treated as Income; (c) however, capital losses on the sale of Indian “non-reporting” mutual funds can in the UK be fully offset against any other gains treated by HMRC as capital gains. Can you please confirm whether 1 (a) to (c) is correct. 2. I understand that taxes deducted at source (TDS) in India on the gains made on the sale of Indian “non-reporting” mutual funds can be offset against the gains which taxed as income in the UK. Can you please confirm that the TDS can be claimed in the UK tax return and whether the full amount of the TDS can be claimed. Thank you.

OK thank you for the clarification.

@HMRC Admin 17 - thank you for your response which is VERY clear and helpful. To help avoid confusion and mis-reporting, it may be worth HMRC revising its response to another thread of a blog: How to report Indian Mutual Fund gains in UK Self Assessment Tax return - Community Forum - GOV.UK (hmrc.gov.uk). I was seeking clarity on that thread as the response by @HMRC Admin 32 to @ThreeLion states that “It [a profit/capital gain on disposal of non-reporting funds] 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.” In the same thread, an earlier response by HMRC Admin 19 also states that gains on disposal of mutual funds “would be subject to UK Capital Gains Tax”. These response are in contradiction with your (HMRC Admin 17) response in this thread.

@HMRC Admin 25 - thank you for your response. I have read the guidance note you refer to but continue to be unclear regarding the aspects covered by my questions. I am not seeking advice and would be very grateful if you could provide responses to the specific questions I have asked.

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?

I'd like clarity on how gains from investments in mutual funds (MFs), managed by asset management companies based in India, are treated for tax purposes. I understand that none of the Indian MFs are considered to be "reporting funds" and therefore (a) dividends paid out by the Indian MFs and capital gains made on the sale of such funds should be included as "Interest and other income from overseas savings" in one's self assessment, and these would be taxed as INCOME; and (b) capital losses on the sale of such MFs are only allowed to be offset against gains accepted by HMRC as "capital gains" (eg capital gains that may be made on sale of UK equities, property, other assets). Is this correct? If not, please can clarity be given on (a) under which category should dividends and gains from Indian MFs be reported and (b) if and how losses on disposal of such MFs can be offset against capital gains.