30 January 2021
As per Sec. section 9(1)(i)(d) of the Act, any income accruing or arising, whether directly or indirectly, through the transfer of a capital asset situated in India is deemed to accrue or arise in India.
Hence, capital gains from sale of shares of an Indian company are taxable in the hands of an NRI. NRIs are not eligible for Indexation benefits and deductions, however, they can avail the benefits from DTAA(Double Taxation Avoidance Agreement).
Under DTAA, there are two methods to claim tax relief – exemption method and tax credit method.
In exemption method, NRIs are taxed in only one country and exempted in another. In tax credit method, where the income is taxed in both countries, tax relief can be claimed in the country of residence.
Transfer of shares from NRIs to NRIs is accorded General Permission by the Reserve Bank of India (RBI). However, such transfer of shares can only be by way of sale of shares for a market-driven consideration.
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