tax treatment for long term capital gain on sale of US compa
This query is : Resolved
17 July 2011
What is the tax treatment for long term capital gain on sale of US company's shares?
The assessee is Indian Resident and has received the funds in Rupees and got the shares under esop agreement from company in india registered as pvt. ltd.
wht is tax treatment????
The assessee is Indian Resident and has received the funds in Rupees and got the shares under esop agreement from company in india registered as pvt. ltd.
wht is tax treatment????
17 July 2011
US company's shares are capital assests.
Since STT is not paid in India on these shares while selling, capital gain is taxable on LTCG.
Indexation is allowed.
Tax Rate is 20% of Capital Gains.
Since STT is not paid in India on these shares while selling, capital gain is taxable on LTCG.
Indexation is allowed.
Tax Rate is 20% of Capital Gains.
17 July 2011
shares are sold in Usa ,there is no question arise of STT and tax on the capital gain as per double tax avoidance agreement between India and Usa , will be charged by the usa on the capital gain....
the tax rate in usa is 30% on the capital gain
the tax rate in usa is 30% on the capital gain
17 July 2011
this is my request if anyone dont know the treatment plz dont comment on it..
thanks
thanks
17 July 2011
Thanks sunny , for rectifying me.
Thanks sunny , for rectifying me.
17 July 2011
What is the tax treatment for long term capital gain on sale of US company's shares?
The assessee is Indian Resident and has received the funds in Rupees and got the shares under esop agreement from company in india registered as pvt. ltd.
wht is tax treatment????
The assessee is Indian Resident and has received the funds in Rupees and got the shares under esop agreement from company in india registered as pvt. ltd.
wht is tax treatment????
26 July 2025
### ✅ Tax Treatment of Long-Term Capital Gains (LTCG) on Sale of US Company Shares
**(For a Resident Indian who received ESOPs)**
---
### 📌 Scenario:
* Assessee is a **Resident Indian**.
* Received **ESOPs** of a **US-based company** (possibly while working in its Indian subsidiary).
* Shares are **foreign securities** (not listed on Indian stock exchange).
* Sold in the **USA**, and proceeds received in **INR**.
* Looking for tax treatment under **Indian Income Tax Law** and **DTAA (India–USA)**.
---
## 🧾 1. **Taxability in India**:
### ✔ Capital Asset:
* Shares of a foreign company = **capital asset** under Section 2(14) of Income Tax Act.
* **Long-Term Capital Asset**: If held for **>24 months** (since foreign shares are unlisted).
* LTCG will arise if holding period exceeds 24 months.
---
### ✔ Tax on LTCG (under Indian Tax Law):
* **No STT** paid on foreign shares → **LTCG is taxable in India**.
* **Tax rate**:
* **20%** on LTCG (with **indexation**) under **Section 112**.
* You can claim **cost of acquisition**, **indexed**, and reduce from sale price.
---
## 🧾 2. **Foreign Tax Credit (FTC) – Relief from Double Taxation**:
If tax is also paid in the **USA** on capital gains, you can claim relief:
### ✔ Under **DTAA (India–USA)**:
* **Capital gains** are generally **taxable in the country of residence** (i.e., India).
* However, **USA may tax** the gain **if shares are of a US company** — and they often do.
### ✔ So:
* You **may have to pay tax in both countries**.
* In that case, claim **credit of tax paid in USA** under **Section 90** or **Section 91** of the Income Tax Act.
---
### 🧾 Conditions for Claiming FTC:
1. **Income must be doubly taxed** – in both USA and India.
2. You must file **Form 67** online **before filing your ITR** in India.
3. Keep documents:
* Tax return filed in USA.
* Proof of taxes paid (Form 1040/1099-B etc.).
* Tax residency proof (you are Indian resident).
* DTAA reference (India-USA).
---
## 📌 3. **Key Notes**:
| Particulars | Tax Treatment |
| ----------------- | ---------------------------------------------- |
| Capital gain type | Long-term (if held >24 months) |
| Tax rate in India | 20% with indexation (Sec. 112) |
| STT applicability | No – as foreign shares are unlisted |
| Tax in USA | Yes, usually taxed on source basis (US shares) |
| Relief available | Yes, via **Foreign Tax Credit** (FTC) |
| DTAA provision | Article 13 – Capital Gains (India–USA DTAA) |
---
## 🧮 Example Calculation (Assuming LTCG):
* Cost of acquisition (indexed): ₹5,00,000
* Sale proceeds: ₹10,00,000
* LTCG: ₹5,00,000
* Indian tax @20% = ₹1,00,000
* Tax paid in USA = ₹90,000
* Net Indian tax payable (after FTC) = ₹10,000
---
## ✅ Final Answer:
As a **Resident Indian**, the **LTCG on sale of US ESOP shares** is **taxable in India @20%** with indexation. If **tax is also paid in USA**, you can claim **foreign tax credit** by filing **Form 67** and referring to the **DTAA between India and USA**.
Let me know if you'd like help drafting Form 67 or working out the exact tax calculation.
**(For a Resident Indian who received ESOPs)**
---
### 📌 Scenario:
* Assessee is a **Resident Indian**.
* Received **ESOPs** of a **US-based company** (possibly while working in its Indian subsidiary).
* Shares are **foreign securities** (not listed on Indian stock exchange).
* Sold in the **USA**, and proceeds received in **INR**.
* Looking for tax treatment under **Indian Income Tax Law** and **DTAA (India–USA)**.
---
## 🧾 1. **Taxability in India**:
### ✔ Capital Asset:
* Shares of a foreign company = **capital asset** under Section 2(14) of Income Tax Act.
* **Long-Term Capital Asset**: If held for **>24 months** (since foreign shares are unlisted).
* LTCG will arise if holding period exceeds 24 months.
---
### ✔ Tax on LTCG (under Indian Tax Law):
* **No STT** paid on foreign shares → **LTCG is taxable in India**.
* **Tax rate**:
* **20%** on LTCG (with **indexation**) under **Section 112**.
* You can claim **cost of acquisition**, **indexed**, and reduce from sale price.
---
## 🧾 2. **Foreign Tax Credit (FTC) – Relief from Double Taxation**:
If tax is also paid in the **USA** on capital gains, you can claim relief:
### ✔ Under **DTAA (India–USA)**:
* **Capital gains** are generally **taxable in the country of residence** (i.e., India).
* However, **USA may tax** the gain **if shares are of a US company** — and they often do.
### ✔ So:
* You **may have to pay tax in both countries**.
* In that case, claim **credit of tax paid in USA** under **Section 90** or **Section 91** of the Income Tax Act.
---
### 🧾 Conditions for Claiming FTC:
1. **Income must be doubly taxed** – in both USA and India.
2. You must file **Form 67** online **before filing your ITR** in India.
3. Keep documents:
* Tax return filed in USA.
* Proof of taxes paid (Form 1040/1099-B etc.).
* Tax residency proof (you are Indian resident).
* DTAA reference (India-USA).
---
## 📌 3. **Key Notes**:
| Particulars | Tax Treatment |
| ----------------- | ---------------------------------------------- |
| Capital gain type | Long-term (if held >24 months) |
| Tax rate in India | 20% with indexation (Sec. 112) |
| STT applicability | No – as foreign shares are unlisted |
| Tax in USA | Yes, usually taxed on source basis (US shares) |
| Relief available | Yes, via **Foreign Tax Credit** (FTC) |
| DTAA provision | Article 13 – Capital Gains (India–USA DTAA) |
---
## 🧮 Example Calculation (Assuming LTCG):
* Cost of acquisition (indexed): ₹5,00,000
* Sale proceeds: ₹10,00,000
* LTCG: ₹5,00,000
* Indian tax @20% = ₹1,00,000
* Tax paid in USA = ₹90,000
* Net Indian tax payable (after FTC) = ₹10,000
---
## ✅ Final Answer:
As a **Resident Indian**, the **LTCG on sale of US ESOP shares** is **taxable in India @20%** with indexation. If **tax is also paid in USA**, you can claim **foreign tax credit** by filing **Form 67** and referring to the **DTAA between India and USA**.
Let me know if you'd like help drafting Form 67 or working out the exact tax calculation.
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