Claiming Capital Gains Exemption in India Using TRC: What NRIs in Singapore and Dubai Need to Know

As cross-border investment by NRIs grows, so does the importance of understanding tax compliance in both countries of residence and India. One common area of confusion is how to use a Tax Residency Certificate (TRC) to claim relief from capital gains tax in India—particularly when the TRC is issued on a calendar year basis (January–December), while India follows a financial year (April–March).

This issue becomes critical when NRIs based in jurisdictions like Singapore or Dubai redeem investments in Indian mutual funds, triggering capital gains. Let’s decode the relevance of TRC in such scenarios and how NRIs can handle this mismatch effectively.

A TRC is an official document issued by the tax authority of a foreign country certifying that an individual is a tax resident of that country during a specified period. Under Section 90(4) of the Indian Income Tax Act, submission of a valid TRC is mandatory for availing benefits under a Double Taxation Avoidance Agreement (DTAA).

When capital gains arise in India—such as from the sale of mutual fund units—a resident of a treaty country (like Singapore or UAE) may be entitled to reduced tax rates or even full exemption, depending on the provisions of the relevant DTAA. However, this benefit is only available if the individual submits a valid TRC, along with Form 10F and a declaration of beneficial ownership.

India follows a financial year (FY) from 1st April to 31st March, whereas countries like Singapore and UAE issue TRCs based on the calendar year (1st January to 31st December).

This leads to an important question: Will a TRC for January–December 2024 be accepted by Indian tax authorities for claiming treaty benefits on capital gains earned during FY 2024–25 (April 2024 to March 2025)?

The Indian tax rules require that the TRC must cover the period during which the income arises. While there’s no rule mandating that it must match the Indian financial year, it must at least include the date of the transaction giving rise to the income.

An NRI residing in Singapore redeems mutual fund units in September 2024, resulting in long-term capital gains. She holds a TRC issued by the Inland Revenue Authority of Singapore (IRAS) for the calendar year 1 January 2024 to 31 December 2024.

Since the capital gains arose in FY 2024–25 and the transaction falls within the TRC period, the TRC is valid for claiming treaty benefits, such as capital gains exemption under the India–Singapore DTAA, subject to other conditions (like POEM and LOB clauses) being satisfied.

An Indian expat living in Dubai sells his mutual fund holdings in February 2025, resulting in taxable capital gains in India. He holds a TRC issued by UAE authorities for calendar year 2024 only.

Since the TRC does not cover February 2025, Indian tax authorities may not accept the 2024 TRC alone. To claim DTAA benefits, the individual should obtain a fresh TRC for calendar year 2025 or ensure that the TRC clearly mentions validity through the date of income.

Until recently, the United Arab Emirates (UAE) issued TRCs for periods aligned with the Indian financial year, i.e., 1 April to 31 March. This was particularly convenient for Indian expats investing in India. However, this practice has now been discontinued. UAE now only issues TRCs for the calendar year, consistent with its own fiscal cycle.

This change has significant implications. For example, if capital gains arise in March 2025, and the individual only holds a UAE TRC for 2024, the claim may not be accepted unless a 2025 TRC is also procured. Therefore, planning and timing the request for TRC becomes essential for tax efficiency.

NRIs must also be mindful of their residential status under Indian tax law, which is determined based on physical presence in India. For FY 2024–25, an individual may become a Resident but Not Ordinarily Resident (RNOR) if:

• They stay in India for 182 days or more, or
• They stay for 120 days or more and have Indian income exceeding ₹15 lakh.

If residential status changes, the DTAA benefit may no longer be available, or may require more rigorous documentation. Particularly, ordinary residents cannot typically claim treaty benefits unless they can prove dual tax residence under tie-breaker rules.

1. Apply for TRC covering Jan–Dec 2024 if you expect income during that period.
2. If any income (like mutual fund redemption) is expected in early 2025, apply for a 2025 TRC in advance or soon after the year begins.
3. Submit the TRC along with:
   • Form 10F
   • PAN
   • Declaration of beneficial ownership
4. Avoid overstaying in India to prevent change in tax residency.
5. Maintain foreign tax returns, salary slips, or residency proof as backup documentation, especially in case of scrutiny.

In most practical situations, a TRC issued for the calendar year is sufficient for claiming DTAA benefits, including exemption on capital gains from mutual funds, provided the TRC covers the actual date of the transaction. NRIs based in Singapore or Dubai should be proactive about their TRC timelines, especially now that UAE no longer offers TRCs matching India’s financial year.

With correct documentation and timing, NRIs can legally and efficiently claim capital gains exemptions under applicable treaties. But in edge cases—like income in March, changing residency status, or backdated TRCs—professional tax guidance is recommended to ensure full compliance and avoid disallowance of claims.

If you’re unsure about your TRC validity or how it aligns with your financial year capital gains, consider scheduling a consultation to review your situation in detail.