Capital gain on foreign shares

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Rajiv Gupta (Querist)
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20 September 2013 My friend's brother (part of original team of google)was allotted 50000 shares at a dollar apiece in 2004. He gifted 1000 shares to my friend (indian resident and salaried) in 2005. During 2012-13, the shares were sold (through A/c maintained by DSP MErril Lynch in US)and my friend claimed LTCG of about Rs. 2 crore as tax exempt during AY 2013-14. Although he has used entire LTCG for tax free bond-50 lakh and rest for purchase of property. Now his return has been taken up for scrutiny by AO and he is worried. Whether he is right in claiming exemption?

Nikhil Kaushik

Nikhil Kaushik (Expert)
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21 September 2013 well the share sell was not tax exempted as LTCG is applicable on sale of shares of equity listed on Indian bourses.

So to claim that the transaction itself was tax exempted is wrong.

However, if the return was filed before the due date, the assessee shall revise the return to claim exemption under section 54EC and 54F.

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Rajiv Gupta

Rajiv Gupta (Querist)
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21 September 2013 Nikhil: The return was duly filed by 31.7.13. Capital gain was also reflected therein and claimed exemption under relevant clauses. My understanding is that there is no capital gain tax if LTCG is on sale of shares and as such there was no need of claiming exemption under Sections 54 EC/F unless this provision is not applicable to foreign shares. Please clarify this issue.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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21 September 2013 Rajiv. the exemption on LTCG on shares is limited to shares listed on Indian stock exchanges.

Rajiv Gupta

Rajiv Gupta (Querist)
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22 September 2013 Thanks Nikhil. I think my friend filed the IT return properly. May be his return has come under scrutiny because of the amount involved. Thanks once again.

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