Tax impact of stt
This query is : Resolved
02 August 2009
what is the tax impact of a foreign company on which transaction tax is paid in that country is sold by a resident indian?
would it qualify for claiming exemption u/s 10(38) if securities transaction tax is paid by such assessee in a foreign country?
would it qualify for claiming exemption u/s 10(38) if securities transaction tax is paid by such assessee in a foreign country?
02 August 2009
You will have to check the rules of that country for taxability in that country. Exemption u/s 10(38) is applicable nly in respect of STT paid in our country on sale of shares held for more than 1 year
02 August 2009
My question is
whether STT paid in a foreign nation would qualify to claim tax exemption u/s 10(38) in India?
whether STT paid in a foreign nation would qualify to claim tax exemption u/s 10(38) in India?
26 July 2025
The short answer is: **No, STT paid in a foreign country does NOT qualify for exemption under Section 10(38) of the Indian Income Tax Act.**
Here’s why:
* **Section 10(38)** grants exemption on long-term capital gains arising from sale of equity shares or equity-oriented mutual funds **only if Securities Transaction Tax (STT) is paid in India** on that transaction.
* This section specifically applies to transactions subject to STT under Indian law.
* If you sell shares of a **foreign company** on a foreign stock exchange and pay any equivalent transaction tax there, that tax **is not STT under Indian law**.
* Therefore, the exemption under **Section 10(38) cannot be claimed** for such foreign transactions.
* The capital gains arising from sale of foreign shares will be taxable in India as per the usual capital gains rules, without any exemption under 10(38).
So, if you are an Indian resident selling foreign shares, you must report capital gains and pay tax accordingly, irrespective of any foreign transaction tax paid.
Here’s why:
* **Section 10(38)** grants exemption on long-term capital gains arising from sale of equity shares or equity-oriented mutual funds **only if Securities Transaction Tax (STT) is paid in India** on that transaction.
* This section specifically applies to transactions subject to STT under Indian law.
* If you sell shares of a **foreign company** on a foreign stock exchange and pay any equivalent transaction tax there, that tax **is not STT under Indian law**.
* Therefore, the exemption under **Section 10(38) cannot be claimed** for such foreign transactions.
* The capital gains arising from sale of foreign shares will be taxable in India as per the usual capital gains rules, without any exemption under 10(38).
So, if you are an Indian resident selling foreign shares, you must report capital gains and pay tax accordingly, irrespective of any foreign transaction tax paid.
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