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Indian accumulation debt mutual fund taxation

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air04
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Indian accumulation debt mutual fund taxation

#164298

Postby air04 » September 5th, 2018, 1:29 am

I have not seen this before on this forum, if so please point me in the right direction.

I was planning to invest in Debt Mutual Funds(denominated in Rupees) in India. Basically it is like a open ended unit trust where the manager has (short dated in my case) Indian bonds denominated in Rupees. It is of type "Growth", which means that the interest is not distributed but is in put into the trust; probably similar to accumulation units in UK.

If the debt mutual fund is sold, in India, after 3 years, the capital gains can be close to zero. What will be the taxation in UK, I am UK resident and domiciled for tax purposes.

If I invest, say Rs 900,000 (worth £10,000) and after 3 years sell for (say) Rs 1,125,000(say worth £11,000 based on exchange rate on that day).
* do I need to find out the real income each year and pay tax each year on income I did not get (yet). It may not be easy to get real income numbers
* do I treat the profit of Rs 225000 as gains and pay CGT in UK in the year I sell the bond?
* do I treat the profit of Rs 225000 as income, and pay income tax on it in UK in the year I sell the bond?
* or ???

A example of such a mutual fund is https://www.valueresearchonline.com/fun ... ecode=2431

air04
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Re: Indian accumulation debt mutual fund taxation

#164402

Postby air04 » September 5th, 2018, 1:42 pm

Thanks to Google, found the answer...

It is treated as income. It is extremely likely that is does not have reporting status.

http://www.thisismoney.co.uk/money/diyi ... ained.html

http://monevator.com/bonds-and-bond-funds-taxed/

So, the benefit for me would be that, if I put into some liquid funds that pay about the same as a bank fixed deposit, then I can choose when to pay tax based on my income for that year.

GPhelan
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Re: Indian accumulation debt mutual fund taxation

#164485

Postby GPhelan » September 5th, 2018, 7:32 pm

Hi,
The list of funds with reporting status is listed on the file with a link on this page : Reporting Funds: introduction
https://www.gov.uk/hmrc-internal-manual ... l/ofm20000

In theory this Offshore funds manual tells you everything that you need to know, but like many such internal manuals you probably need to understand it in the first place before it makes sense: https://www.gov.uk/hmrc-internal-manual ... nds-manual

air04
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Re: Indian accumulation debt mutual fund taxation

#166065

Postby air04 » September 13th, 2018, 11:51 am

Thanks GPhelan.

None from the Indian market(ISIN IN*) with reporting status. I wanted to invest in low risk liquid funds so that I can defer income tax for now on investments.


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