Capital Gains tax on NRIs

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Rajesh Khanna

Senior Manager Finance

57 Points Joined August 2009

Dear Friends

Can you any one tell me the taxation implication on capital gains due to sale of equity shares (unlisted) by a NRI. Based on my understanding, I have drafted a small note. Please confirm if this is right.

Thanks in advance

Rajesh

TAX PAYABLE BY NRIS ON LONG-TERM CAPITAL GAINS

Long-term capital gains of an asset other than a specified asset	20%
Long-term capital gains of a specified asset	10%

Please see below for definitions of Investment Income / Specified asset

“investment income” means any income derived (other than dividends referred to in section 115-O) from a foreign exchange asset;

“foreign exchange asset” means any specified asset which the assessee has acquired or purchased with, or subscribed to in, convertible foreign exchange;

“specified asset” means any of the following assets, namely :—

(i) shares in an Indian company;

(ii) debentures issued by an Indian company which is not a private company

(iii) deposits with an Indian company which is not a private company

(iv) any security of the Central Government as defined in clause (2) of section 240 of the Public Debt Act, 1944 (18 of 1944);

(v) such other assets as the Central Government may specify in this behalf by notification in the Official Gazette.

Replies (2)

Juzer Sadikot

CA - innovative solutions for Imports an

1309 Points Joined November 2008

TAX PAYABLE BY NRIS ON LONG-TERM CAPITAL GAINS ON SALE OF SHARE OF UNLISTED COMPANY

Long-term capital gains of an asset other than a specified asset

20% (after adjusting cost Inflation Index)

Long-term capital gains* of a specified asset

Lower of

i. 20% (after adjusting cost Inflation Index)

ii. 10% (without adjusting for Cost of Inflation Index)

Please see below for definitions of Long-term capital gains

“long-term capital gains” means income chargeable under the head “Capital gains” relating to a capital asset, being a foreign exchange asset which is not a short-term capital asset;

“foreign exchange asset” means any specified asset which the assessee has acquired or purchased with, or subscribed to in, convertible foreign exchange;

“convertible foreign exchange” means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder;

“specified asset” means any of the following assets, namely :—

(i) shares in an Indian company;

(ii) ----------------------------------------;

(iii) ---------------------------------------;

(iv) ---------------------------------------;

(v) ----------------------------------------

Further, by re-investing such gains/sales proceeds in Residential house or bonds/share etc., an NRI can claim whole/part of tax exemption on such Capital Gains.