Capital positive factors on shares purchased in overseas foreign money don’t get indexation profit

What is the long-term capital acquire tax fee in case of sale of listed choice shares for non-residents? Is it 20% or 10%, with or with out indexation?

– Anonymous

It is assumed that the query is in relation to shares in an Indian firm. There could be two eventualities – both the shares are bought in overseas foreign money or in Indian foreign money by the non-resident.

If shares are bought in overseas foreign money, capital acquire is calculated in overseas foreign money after which transformed into Indian foreign money. In this case, advantage of indexation of value shouldn’t be obtainable, nevertheless, the relevant tax fee shall be 10% plus relevant surcharge and cess.

Permissibility of buying Indian shares in overseas foreign money is ruled by Foreign Exchange Management Act (FEMA), 1999, associated guidelines/laws and FDI pointers. Subject to compliance of the above, there could also be a scenario the place overseas investor should purchase share of an Indian firm in overseas foreign money.

If shares are bought in Indian foreign money, then there isn’t a requirement of conversion/ reconversion of capital acquire in overseas foreign money. The capital acquire is calculated as per sale worth and value of acquisition in INR. The taxpayer can have an choice to decide on the decrease between tax fee of 20% with indexation and 10% with out indexation.

In case of listed models which might be equity-oriented, the Long Term Capital Gain (LTCG) shall be taxed below part 112A of the Act (supplied Securities Transactions Tax is paid on the time of sale). LTCG exceeding ₹1 lakh shall be taxed at 10% with none indexation of value. Also, in case the models have been bought earlier than 31 January, 2018 then the advantage of grandfathering shall even be thought-about whereas calculating the capital positive factors (i.e. distinction between market worth as on 31 January 2018 and buy worth shall be thought-about as exempt from tax).

In case of listed models which might be debt oriented, the LTCG shall be taxed at 20%. Benefit of indexation of value shall be obtainable. Take observe that debt-oriented models shall be thought-about as ‘long-term’ solely after 36 months of holding interval.

In case of unlisted funds, both fairness oriented or debt oriented, the positive factors shall be taxed at 10% with out indexation, in case of a non-resident vendor.

Further, if the question is with regard to overseas shares it could be famous that overseas shares although listed on a inventory alternate exterior India shall be handled as unlisted for the aim of taxation in India and tax charges as relevant to unlisted shares shall apply.

-Answered by Shailesh Kumar, Partner, Nangia & Co LLP. Send queries at mintmoney@livemint.com.

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