Gold bonds, ULIPs, REITs and Indian shares compared with mutual funds
Four more Indian products that people confuse with mutual funds. We show who may buy from abroad, what India taxes in 2026-27 and what is still not settled in the U.S., Canada and UK.
Prepared by Prem Tax and Accounting Corp. Last checked against official sources on November 5, 2026.
Sovereign gold bonds (SGBs), unit-linked insurance plans (ULIPs), real estate and infrastructure trusts (REITs and InvITs) and direct Indian shares are not mutual funds. A gold ETF is a mutual fund. Our Four-Shelf Keepsake List sorts the papers.
- SGBs: residents only, no new series since February 2024. Redemption is tax-free from tax year 2026-27 only if bought at issue and held to maturity.
- ULIPs: non-death payouts are tax-free only if the policy passes the premium tests.
- Shares: since 12 June 2026 any individual abroad may buy listed Indian shares, within limits.
Side by side
| Product | From abroad | Compared with a mutual fund |
|---|---|---|
| SGB | Residents only; an ex-resident may hold to maturity | A government bond priced in gold |
| Gold ETF | NRIs and OCIs | It is a mutual fund |
| ULIP | Persons abroad; pay from abroad or from NRE, FCNR or NRO funds | Insurance, not a fund |
| REIT or InvIT | Anyone abroad, except citizens and entities of Pakistan and Bangladesh | A listed trust; public offers have a minimum of Rs 10,000 to Rs 15,000 |
| Direct shares | Any individual abroad: under 10% of a company each, 24% together | You own the shares |
How India taxes it (FY 2026-27)
FY 2026-27 (tax year 2026-27 in the Income-tax Act, 2025) is 1 April 2026 to 31 March 2027. Add 4% cess. Rates change yearly.
| Product | How India taxes it |
|---|---|
| SGB | Interest at slab rates, no TDS. Redemption is exempt only if bought at issue and held to maturity |
| Gold ETF, taxable SGB | 12.5% after 12 months, slab rates sooner |
| ULIP | Exempt if premium tests are met (ULIPs from 1 February 2021: yearly premiums within Rs 2,50,000); otherwise capital gains |
| REIT or InvIT | Non-residents: interest 5%, rent at rates in force. Dividends passed through from the trust's operating company (SPV) are exempt from 1 April 2026; 10% can still be withheld if the SPV chose the lower company rate |
| Direct shares | Long-term gains (over 12 months) above Rs 1.25 lakh a year: 12.5%; sooner, 20%. Dividends to non-residents: 20% or a lower treaty rate |
Abroad: USA, Canada and the UK
| Country | What the rules say |
|---|---|
| USA | SGB: debt, not stock (our reading). Cash-value policy: FBAR and Form 8938 (above the limits), and a possible 1% excise tax on premiums to a foreign insurer. Share: a PFIC only if 75% of its income or 50% of its assets are passive. Gold ETF, REIT or InvIT: no IRS ruling names Indian funds or trusts, so not settled |
| Canada | Form T1135 covers shares, bonds, trust units and a foreign life policy once cost tops CAD 100,000 (tax years 2025 and 2026). REITs and InvITs under sections 94 and 94.1: not settled |
| UK | ULIP gains are usually taxed as income. A gold ETF depends on HMRC's reporting-fund list. SGBs: no HMRC text found. REITs and InvITs: not settled |
Our checklist
The Four-Shelf Keepsake List gives each product a shelf:
- Gold: SGB statement, issue date, interest.
- Policy: issue date, premiums, payouts.
- Trusts: payouts split into interest, rent, dividend, repayment.
- Shares: demat statement, the account you designated, dividends with TDS.
Common questions
Can an NRI buy a sovereign gold bond?
No. Only residents may buy. An ex-resident may keep a bond to early redemption or maturity.
Is a ULIP payout always tax-free?
No. Death proceeds stay exempt; other payouts need the premium tests. A failing ULIP is taxed as capital gains: see [India tax on fund gains](/indian-mutual-funds/india-rules/india-tax-on-fund-gains-and-dividends/).
Are REIT payouts tax-free?
No. Interest and rent are taxable. A repayment of capital is not income until total receipts pass the unit's issue price.
Official sources
- RBI: FAQ on Sovereign Gold Bonds
- Finance Act, 2026 (Gazette of India)
- Taxation and Other Laws (Amendment) Act, 2026 (Gazette of India)
- Income-tax Act, 2025 (Gazette of India)
- RBI: Master Direction, Foreign Investment in India
- RBI: Master Direction, Insurance
- IRS: Comparison of Form 8938 and FBAR requirements
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