DTAA Explained: Who Taxes an NRI’s PMS and GIFT City Gains?

You live in Dubai, London, Singapore or New Jersey. Your portfolio manager in Mumbai sells a stock at a profit. Two governments now have a claim on that profit.

India has a claim because the company is Indian and the sale happened on an Indian exchange. India is the source country. Your country of residence has a claim because many countries tax residents on worldwide income. That is the residence country.

If both countries used their full claim, you would pay tax twice on one gain. A double taxation avoidance agreement, usually shortened to DTAA, is the contract between the two governments that settles who gets what.

Most NRIs know the term. Fewer have read the article that applies to them, and that is where expensive assumptions start. "I have a DTAA, so my gains are exempt in India" is one. "GIFT City funds are covered by the DTAA" is another. Neither is accurate as a general statement.

This article explains the concept, then follows it through two structures: a portfolio management service (PMS), where you own the shares, and GIFT City funds, where a fund stands between you and the shares. Claim paperwork, detailed capital gains rates and US PFIC rules are separate subjects and get only a brief mention.

A tax treaty is a bilateral agreement that India's central government signs with another country and then notifies under the Income-tax Act. Once notified, it has legal force in India for residents of the two countries.

It does three jobs.

First, it defines who is a resident of each country, with tie-breaker rules when someone qualifies in both. Treaty benefits go only to a resident of one of the two states.

Second, it allocates taxing rights by income type, with a separate article for dividends, interest, capital gains, salaries and so on. The wording matters. "May be taxed in that State" means the source country keeps its right and the residence country may tax as well. "Shall be taxable only in" means one country alone taxes it.

Third, it requires relief where both countries are still allowed to tax. That is the elimination-of-double-taxation article, covered below.

For an NRI investing in India, India is the source country and the country you live in is the residence country. The DTAA you use is the one between those two, not one of your choice. A UAE resident uses the India-UAE DTAA. If the same person moves to London, the India-UK treaty applies from then on.

A DTAA does not create a tax where domestic law has none, and it does not remove tax in your residence country simply because India exempted the income. Nor does it apply automatically. You have to be a genuine resident of the other country, claim the benefit, and satisfy the anti-abuse rules.

The treaty with Mauritius dates from 1983. Until 2016 its capital gains article left gains on shares of Indian companies to the investor's country of residence, and Mauritius did not tax them. The Singapore and Cyprus treaties worked in a similar way.

That is the origin of the idea that a DTAA means exempt gains. It was true for some countries for a long time. It is mostly not true now.

• 2007: A protocol to the India-UAE treaty rewrote its capital gains article. From 1 April 2008, gains on shares of an Indian company may be taxed in India.
• 10 May 2016: India and Mauritius signed a protocol giving India the right to tax gains on shares acquired on or after 1 April 2017. Shares acquired earlier were protected, with a half-rate transition until 31 March 2019.
• 18 November 2016: A revised India-Cyprus treaty replaced the 1994 one, with the same source-based rule and the same protection for older investments.
• 30 December 2016: The Third Protocol to the India-Singapore treaty did the same from 1 April 2017.
• 2017 to 2019: India signed the OECD's Multilateral Instrument (MLI) on 7 June 2017 and deposited its ratification on 25 June 2019. It entered into force for India on 1 October 2019, and India listed 93 of its treaties to be covered.
• 15 January 2026: The Supreme Court ruled against Tiger Global in a dispute over the India-Mauritius treaty, holding that a residency certificate does not by itself guarantee treaty benefits.
• 1 April 2026: The Income-tax Act, 2025 took effect. The treaty provisions moved from section 90 of the 1961 Act to section 159.

The direction is consistent. Since 2016 India has renegotiated so that gains on Indian shares are taxed in India, and has added rules against using a tax treaty mainly to avoid tax.

When a treaty lets the source country tax, the residence country has to prevent double tax. The OECD Model Tax Convention, the template most treaties follow, offers two methods in Articles 23 A and 23 B.

Under the exemption method, the residence country leaves out income that the DTAA allows the source country to tax. Some countries still count the exempt income when setting the rate on your other income.

Exemption can also arise from the allocation article itself. If an article says a gain "shall be taxable only" in your residence country, India cannot tax it at all. That is what the old Mauritius and Singapore share clauses gave.

Under the credit method, your residence country taxes the income but subtracts the tax you paid in the source country. The credit is normally capped at the home-country tax on that income, so if India charged more, the excess is usually lost.

India's treaties with the United States and the United Kingdom use the credit method. Article 25 of the India-US treaty says the United States will allow its residents and citizens a credit for income tax paid to India, within the limits of US law. In the US, individuals claim a foreign tax credit on Form 1116.

A simple illustration, ignoring surcharge, cess, exchange rates and credit limitations: a US-resident NRI makes a short-term gain of Rs 10 lakh on listed Indian shares in a PMS. India taxes it at 20%, or Rs 2 lakh. If US tax on that gain works out to 24%, or Rs 2.4 lakh, the credit leaves Rs 40,000 to pay in the US. The total is Rs 2.4 lakh, the higher of the two, not the sum.

Notice what the DTAA achieved. It did not reduce Indian tax. It stopped the two taxes from stacking.

The capital gains article, usually Article 13 or 14, is the one that matters most for an equity investor. The rules below were checked against treaty texts and official releases. Other countries are left out because their treaties were not verified for this article.

Article 13 of the India-US treaty is one sentence long. Apart from shipping and air transport, "each Contracting State may tax capital gains in accordance with the provisions of its domestic law." Article 14 of the India-UK treaty uses almost identical words.

For an NRI in either country, the DTAA gives no protection from Indian capital gains tax. India applies its normal rates, and the US or UK applies its own rules and gives credit for the Indian tax.

Article 13 of the India-UAE treaty, reproduced in full in a 2024 tribunal order, has five paragraphs. Paragraph 4 says gains from the alienation of shares in a company resident in a contracting state "may be taxed in that State." For shares of an Indian company, that means India. Paragraph 5 is the residual clause: gains from any property not covered in paragraphs 1 to 4 "shall be taxable only" in the state where the seller is resident.

So a UAE resident pays Indian tax on capital gains on shares. The UAE levies no personal income tax, so there is no second tax to relieve. On share gains the DTAA neither hurts nor helps.

All three treaties now split shares by acquisition date. In the India-Singapore treaty, gains on shares acquired before 1 April 2017 are taxable only in the seller's country of residence, while gains on shares acquired on or after that date may be taxed in the country where the company is resident. The Mauritius and Cyprus treaties follow the same pattern.

An NRI who has genuinely held Indian shares since before April 2017 may still be protected. Anything bought since then, which covers most PMS portfolios, is taxable in India.

Mauritius has one more change pending. A protocol signed on 7 March 2024 adds a Principal Purpose Test and a new preamble. The Mauritian Cabinet agreed to ratify it on 17 July 2026. At the time of writing, the two governments had not yet notified each other, so it is not in force.

You may have read that UAE or Singapore NRIs pay no Indian tax on mutual fund gains. That comes from tribunal rulings that mutual fund units are not "shares" and so fall into the residual paragraph. The Delhi bench of the Income Tax Appellate Tribunal held this for a UAE resident in October 2024, and the Mumbai bench for a Singapore resident on 26 March 2025.

These are tribunal decisions, not High Court or Supreme Court rulings, and the tax department can contest them. They do not help a PMS investor, because a PMS holds shares.

A DTAA changes the Indian tax bill most clearly on dividends and interest, because those articles set a ceiling on the source country's rate.

India's domestic law withholds tax on dividends paid to non-residents at 20% plus surcharge and cess. The treaty rates for portfolio investors are:

Lower rates in some treaties apply only to companies holding a set share of the payer's capital.

The US row is instructive. The treaty ceiling of 25% is above India's 20% domestic rate, so a US-resident NRI simply pays the domestic rate. The treaty rate is a maximum, not a rate you must pay.

Interest matters mainly for NRO deposits and bonds, where banks typically withhold at about 30% plus surcharge and cess unless treaty documents are on file. In a PMS, dividends are the regular DTAA item.

A PMS is not a fund. The portfolio manager trades in your name, and the shares sit in your own demat account. For tax purposes, every sale is your sale.

That makes the treaty analysis simple:

• You are the taxpayer. Gains are your capital gains, taxed under India's rules for non-residents. On listed equity that is 20% for short-term gains and 12.5% on long-term gains above Rs 1.25 lakh, under sections 196 and 198 of the 2025 Act (old sections 111A and 112A), before surcharge and cess.
• The share paragraph of your treaty applies. Under the US, UK and UAE treaties, and for shares bought from 1 April 2017 under the Singapore, Mauritius and Cyprus treaties, India keeps its right to tax.
• Relief comes from your residence country. Because the Indian tax is paid by you, on your own gain, it is the kind of tax a credit-method country normally recognises. You will have tax statements in your name to support the claim.
• Dividends get the treaty ceiling if you have filed your documents with the companies' registrars or your custodian.

An IFSC-based portfolio manager does not change this for Indian shares. Schedule VI of the 2025 Act exempts a non-resident's income from a portfolio managed in an IFSC only to the extent the income accrues or arises outside India. Gains on Indian shares arise in India.

Claiming a DTAA benefit has its own procedure: a tax residency certificate from your country of residence, Form 10F on the income-tax portal, a lower-withholding certificate where justified, and the claim in your Indian return. That is a subject in itself.

GIFT City funds change the picture because a fund stands between you and the shares. There are three layers.

Layer one, the fund. A qualifying "specified fund" in the IFSC, such as a Category III AIF, gets exemptions under Schedule VI of the 2025 Act (old section 10(4D)) for several kinds of income to the extent it is attributable to units held by non-residents. Gains on shares of Indian companies sold on mainland exchanges are not within that exemption. The fund pays tax on them at the rates in section 210 (old section 115AD).

Layer two, you in India. Schedule VI separately exempts a unit holder's income from a specified fund, and gains on transferring its units (old section 10(23FBC)). India does not tax you again.

Layer three, you at home. Your residence country applies its own law to your return from the fund.

Now apply the tax treaty. India charges no tax in your hands, so on the Indian side there is nothing for a DTAA to reduce. The fund is an Indian taxpayer. It is not a resident of your country and cannot use your treaty for its own gains.

At home, a foreign tax credit depends on tax paid by you. Tax paid by the fund on its own income is not automatically your tax. Whether your country lets it flow through depends on how that country classifies the fund, and that is a question for a local adviser.

For a UAE resident, the result is clean: no further tax in India and none in the UAE. For a UK or US resident, the home country may tax the full gain with little or nothing to credit. US investors in GIFT City funds also face PFIC rules, a separate topic.

"Tax-exempt in India for the investor" and "tax-free" are different statements. A DTAA does not close that gap.

None of this makes a DTAA useless. Used properly, it makes cross-border investing more predictable.

• Certainty before you invest. You can read which country may tax a gain before you send money.
• A cap on total tax. With a credit-method country, your combined bill on a gain is roughly the higher of the two countries' rates rather than both added together.
• Lower withholding on income. UK, UAE and Cyprus residents can bring Indian dividend withholding down from 20% to 10%.
• Protection for old holdings. Shares genuinely acquired before 1 April 2017 by Singapore, Mauritius or Cyprus residents keep their residence-only treatment. A CBDT circular of 21 January 2025 confirmed the Principal Purpose Test does not reach those grandfathered shares, and notifications of 31 March 2026 said GAAR will not apply to income from transferring pre-April 2017 investments.
• The better of two rules. Indian law lets you use the Act where it is kinder than the treaty, as the US dividend example shows.
• A basis for choosing structure. Once you know where tax falls, you can compare a PMS with a fund after tax for your country.

It also makes life simpler: an NRI who knows the relevant article can ask an adviser a precise question.

A treaty article is one input. The structure you buy is the other. PMS Sahi Hai is built to make the second one visible, so the tax question you take to your adviser is specific.

Start with the summary. The platform's DTAA by country page sets out the same three moving parts used in this article: your home country taxes worldwide income, India taxes India-sourced gains, and the treaty stops the overlap through a credit or an exemption. It lists six corridors, the US, UK, Singapore, UAE, Canada and Australia. It is a short page, and it does not quote articles or dates. This article is the longer explanation behind it.

Then look at structure. Whether you hold shares or fund units decides who the Indian taxpayer is, as the PMS and GIFT City sections above show. The compare shelf puts PMS, AIF and GIFT City strategies in one place, where you can shortlist up to four and read them side by side. The GIFT City page for NRIs describes capital gains treatment there as depending on your country of residence, which is the point this article makes in detail.

Then ask. Nyra, the platform's AI research tool, is described on the site as grounded in SEBI, AMC and IFSCA primary sources, with DTAA, FEMA, PFIC and IFSC tax among the topics it handles, and it cites a source for each answer. Use it to pin down what a strategy is: a PMS in your own demat account, or a pooled fund.

Two related guides go deeper on the Indian side: how PMS gains are taxed in your own hands and how GIFT City funds are taxed.

One limit matters. The site says its DTAA content is general information, not tax advice, and that Nyra is an analytical tool, not a SEBI-registered investment adviser. A platform can tell you what you would own. Whether your country credits the tax is for a cross-border adviser to confirm.

Indian law says that where a treaty applies, the Income-tax Act applies only to the extent it is more beneficial to the taxpayer. In the 1961 Act this was section 90(2). In the Income-tax Act, 2025, effective 1 April 2026, it is section 159(4).

This is what people mean by treaty override. The DTAA overrides domestic law where it is better for you, and domestic law still applies where that is better.

Section 159 also sets limits:

• Section 159(6) (old section 90(2A)) says the general anti-avoidance rule in Chapter XI applies even if it is not beneficial to the taxpayer. A treaty does not shield an arrangement that fails GAAR.
• Section 159(8) (old section 90(4)) says a non-resident cannot claim treaty relief without a certificate of residence from the government of the other country.

The treaty override is real, but it works one item at a time and only for genuine residents.

DTAA relief used to be a paper exercise between an investor, a bank and a chartered accountant. Three things have changed that.

Filing has moved online. Form 10F is submitted on the income-tax portal, and listed companies ask non-resident shareholders for residency documents before each dividend.

Treaties are updated at scale. The MLI, ratified by India in 2019, changed many of India's treaties through one instrument instead of dozens of protocols. The text that applies to you may therefore be a "synthesised" version, not the original you find through a search engine.

Tax authorities share more. India's revised treaties with Mauritius, Singapore and Cyprus updated their exchange-of-information articles to current international standards.

Research tools have followed. Platforms now publish country summaries and compare structures side by side. That widens access, but a country card will not tell you when you bought your shares.

The limitations deserve the same attention as the benefits.

Share gains are taxable in India. Under all six treaties reviewed here, India can tax capital gains on shares bought today. An NRI expecting an exemption on a PMS portfolio will not find one.

Anti-abuse rules can take the benefit away. The Principal Purpose Test denies a benefit when obtaining it was one of the principal purposes of an arrangement. It reaches treaties through the MLI, though the US is not a party to the MLI and its treaty has its own limitation-on-benefits article. In the Tiger Global case, decided on 15 January 2026, the Supreme Court held that a residency certificate does not stop the tax authority from examining who really controls a structure.

For an NRI who lives and works abroad and invests in their own name, these rules are rarely a problem. They matter more if you invest through a holding company or have recently changed residence.

Parts of the law are unsettled. The mutual fund rulings are tribunal-level. A Mumbai tribunal held in 2025 that MLI changes cannot be enforced without a separate notification, and that question may go higher.

No tax in India can mean no relief at home. If India exempts your income, as with a GIFT City specified fund, a credit-method country may tax all of it.

Credits are capped. A foreign tax credit rarely exceeds the home-country tax on the same income, and mismatched tax years (India's runs April to March) can leave part of it unused.

It needs upkeep. Residency certificates cover a period, and your status can change if you move or spend long stretches in India.

A double taxation avoidance agreement is best read as a map of who taxes what. It is not a discount.

For shares, the map is now fairly uniform. India taxes gains on Indian shares, and your residence country either gives credit or has no tax of its own. For dividends, a tax treaty often lowers Indian withholding. For GIFT City funds, Indian tax sits inside the fund, and the outcome depends on how your home country treats that fund.

Three questions settle most cases. Where are you tax-resident this year? Do you hold shares in your name, or units of a fund? Does your home country tax foreign gains and credit foreign tax?

Take those answers to a cross-border tax adviser qualified in both countries before you commit capital. Treaty texts change, and court rulings shift how they are read. For the structure question, PMS Sahi Hai and Nyra can show whether a strategy is a PMS or a pooled fund before that conversation.

Before your next India allocation, write down four things: your country of tax residence this year, the capital gains article of its DTAA with India, whether the product is a PMS or a fund, and how your home country taxes foreign gains. If you are unsure about the third, ask Nyra what a strategy holds and how it is structured, or start from the PMS Sahi Hai NRI hub. Then ask a cross-border tax adviser to confirm the result in writing before you wire money.