How sale of overseas shares is taxed in India

What would be the tax applicability and the conversion charges if an Indian resident sells his shares which can be listed on the US inventory change? Can the resident will get each conversion and indexation profit on such a sale?

—Name withheld on request

It is assumed that the particular person promoting the shares qualifies as a Resident and Ordinarily Resident in India.

Any good points or loss arising from switch of the shares is chargeable to tax as capital achieve or capital loss. The taxability would additional depend upon whether or not the capital achieve or loss is classed as brief time period or long run.

Foreign listed shares (not being a share listed on a acknowledged inventory change in India), are thought-about to be long run capital asset, if such shares are held for greater than 24 months earlier than sale and any achieve or loss from such sale, shall accordingly be thought-about as long-term capital achieve or loss (LTCG/L).

If such shares are held for twenty-four months or much less, then the identical shall be thought-about as short-term capital achieve or loss (STCG/L).

The LTCG on overseas shares is taxable at 20%, in addition to the relevant surcharge and cess. The good thing about value inflation index may be utilized to the price of acquisition whereas calculating taxable LTCG/L. STCG is taxable on the relevant tax charges for the person (plus relevant surcharge and cess).

Further, for the aim of conversion of earnings from capital good points (each STCG/L and LTCG/L) earned in overseas foreign money to rupees, telegraphic switch shopping for price as adopted by State Bank of India as on the final day of the month, instantly previous the month by which the shares are transferred, shall be thought-about.

In case of LTCG, exemptions if any obtainable beneath Section 54F of the Income-tax Act, in direction of funding in a residential property could also be evaluated. Also, the feedback above are restricted to the Indian tax implications beneath the Indian home tax legal guidelines. Any abroad tax implications and any profit or aid beneath the relevant double tax avoidance settlement should be individually evaluated.

Parizad Sirwalla is accomplice and head, international mobility providers, tax, KPMG in India.

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Updated: 10 Sep 2023, 10:19 PM IST