Rationalisation of taxation of capital gains on transfer of capital assets by non-residents
The existing provisions of Section 115AD of the Act provide that where the total income of a specified fund or Foreign Institutional Investor includes -
(a) income received in respect of securities (other than units referred to in section 115AB); or
(b) income by way of short-term or long-term capital gains arising from the transfer of such securities,
the income-tax on the income by way of long-term capital gains referred to in clause (b), if any, included in the total income, shall be calculated at the rate of ten per cent.
2. Certain amendments were carried out in the above provisions by the Finance (No.2) Act, 2024. The rate of taxation on long-term gains arising from the transfer of capital assets was amended to twelve and one-half per cent in the case of all assessees, whether resident or non-resident, with effect from 23.07.2024. It was seen that while the rates of taxation in the case of specified fund or FIIs in case of long-term gains referred to in section 112A have been brought to parity with the rates applicable for residents, the rate of income-tax calculated on the income by way of long-term capital gains not referred to in section 112A were retained at ten per cent vide Finance (No.2) Act, 2024.
3. It is proposed to amend the provisions of section 115AD to provide that income-tax on the income by way of long-term capital gains on transfer of securities (other than units referred to in section 115AB) not referred to in section 112A, if any, included in the total income, shall be calculated at the rate of twelve and one-half per cent.
4. These amendments will take effect from the 1st day of April, 2026, and shall accordingly, apply
in relation to the assessment year 2026-27 and subsequent assessment years.
[Clause 23]
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