First proviso to Section 48 - Capital gain - NRI

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This discussion clarifies how Non-Resident Indians (NRIs) should report capital gains from mutual funds in their Indian Income Tax Return (ITR). The first proviso to Section 48 of the Income Tax Act specifically applies to shares and debentures of Indian companies purchased by NRIs using foreign currency. For mutual fund units bought in Indian Rupees, whether through an NRO account or other means, capital gains should be reported under the normal transaction schedule, not under the first proviso to Section 48.

Suraj

Suraj (Querist)

02 September 2025 Dear Sir / Madam,

Mr A is an NRI. He is earning LTCG and STCG on mutual funds in India. How to show this capital gain in his ITR? Will it be shown as normal transactions or under the first proviso to Section 48? I am confused regarding this first proviso.
Please guide.
Thanks & Regards,
Suraj

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

03 September 2025 First Proviso to Section 48 applies only to shares and debentures of Indian companies purchased by NRIs in foreign currency (i.e., through NRE/FCNR accounts). For such cases, capital gains are computed by converting the sale and purchase price into the same foreign currency as was originally used.

For mutual fund units purchased in Indian Rupees (either via NRO account or other sources), gains should be shown under the normal transaction schedule for capital gains — the first proviso is not applicable in this context.
For typical NRI investments in mutual funds (with units purchased in INR), capital gains are reported as normal transactions, without applying the first proviso to Section 48.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

20 September 2025 Good Luck..

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