New Delhi, April 15 -- The Mumbai bench of the Income Tax Appellate Tribunal recently ruled that capital gains from mutual funds were not taxable in India under the India-Singapore tax treaty, as mutual fund units fell under the residual clause of the India-Singapore double taxation anti-avoidance agreement (DTAA). As a result, a taxpayer's short-term capital gains of Rs.1.35 crore from Indian mutual funds were deemed not taxable in India.

"Mutual funds are not defined as shares in the treaty as well as in the Income Tax Act, so the taxpayer got the benefit," said Mayank Mohanka, founder of TaxAaram India.

Here's a closer look at the residual clause of DTAAs that exempt mutual funds from capital gains tax, which countries' DTAAs have it...