Transfer of shares by a non-resident

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This query is : Resolved

SAI CHANDU B (Querist)

16 August 2013 A Foreign Company sold Shares in an Indian Company to another Foreign Company. (Both foreign companies do not have PE in India). The following are my queries:
1. Whether the transaction is subject to Capital Gains Tax in India?
2. If so, what is the rate of Tax on such Capital Gains. (Assume it as Long Term.)
3. Whether the buyer foreign company should deduct tax from the seller as per Sec.195 (TDS applicability)?
4. If so, whether it should apply TAN? (It has no PE in India and hence no address in India). How to comply with Sec.195 in such case?
Thanks in advance.

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)

16 August 2013 1) Yes
2) LTCG for listed shares it is NIL otherwise 30.9%
3)Purchase and sale does not attract any income and provisions of section 195 will be applicable only on profit.
4) No need as reply 3 above will apply

SAI CHANDU B

SAI CHANDU B (Querist)

16 August 2013 Thank you Mr.Agarwal. But I need some clarifications on your reply.
2) Shares of a private company are being sold. I think as per Sec.112(1)(c)(iii), the rate of LTCG in this case is 10%. Pls confirm.

3) Sec.195 does not talk about profit. It says "any sum chargeable under the provisions of this Act." Since Capital Gains is chargeable to tax as per your reply to point 1 of this query, I feel that TDS is applicable.

4) Based on your reply to point 3, Pls explain how to comply with point 4.