Other Important Exemptions Regarding Capital Gains Available to NRI

[Capital Gain of an NRI could be Completely Exempt from Income Tax]

The following are some of the important exemptions regarding capital gains available to an NRI under different sections of the Income Tax  Act:

  1. Gains as a result of distribution of the capital asset of a company in liquidation (Section 46).

  2. Gains arising on the distribution of capital assets on the partition of a Hindu undivided family (Section 47(i)).

  3. Gains arising on the transfer of capital asset under a gift, or will or an irrevocable trust (Section 47(iii)). This is not applicable for shares received by an employee under ESOP and gifted or transferred under an irrevocable trust.

  4. Gains arising on the transfer by a parent company of its capital assets to a wholly-owned Indian subsidiary company which is resident in India (Section 47(iv)).

  5. Gains as a result of transfer of a capital asset by a 100% subsidiary company to its Indian holding company (Section 47(v)). However, this and Section 47(iv) will not be applicable to the transfer of a capital asset after 29.2.88 as stock-in-trade.

  6. Gains arising out of any transfer of a capital asset by the amalgamating company to the amalgamated Indian company, in a scheme of amalgamation (Section 47(vi)).

  7.  Gains arising out of any transfer in a scheme of amalgamation of shares held in an Indian company subject to certain conditions (Section 47(via)).

  8. Gains arising out of any transfer, in a demerger, of a capital asset by the demerged company to the resulting company, if the resulting company is an Indian company (Section 47(vib)).

  9. Gains arising of any transfer in a demerger, of a capital asset, being a share or shares held in an Indian company, by the demerged foreign company to the resulting foreign company, if— (a) at least seventy-five per cent, of the shareholders of the demerged foreign company continue, to remain shareholders of the resulting foreign company, and (b) such transfer does not attract tax on capital gains in the country, in which the demerged foreign company is incorporated:

    Provided that the provisions of Sections 391 to 394 of the Companies Act. 1956 shall not apply in case of demergers referred to in this clause (Section 47(vic)).

  10. Gains arising out of any transfer or issue of shares by the resulting company, in a scheme of demerger to the shareholders of the demerged company if the transfer or issue is made in consideration of demerger of the undertaking (Section 47(vid)).

  11. Gains arising out of any transfer by a shareholder, in a scheme of amalgamation of a capital asset being a share or shares held by him in the amalgamating company, if he transfer is made in consideration of the allotment to him of any share or shares in the amalgamated Indian Company (Section 47(vii)).

  12. Gains arising out of transfer of bonds or shares as referred to in Section 11 5AC(1) made outside India by a non-resident to another non-resident (Section 47(viia)).

  13. Gains arising from the transfer of a capital asset, being any work of art, archaeological, scientific or art collection, book, manuscript, drawing, painting, photograph or print in cases where such asset is transferred by the assessee to the Government or a University or the National Museum, National Art Gallery. National Archives or any such other notified public museum or institution (Section 47(ix)). In certain cases before the expiry of 8 years from the date of transfer of capital asset under Section 47(iv) or if it is converted into stock-in-trade, the gains would be taxable in the year of first transfer as per Section  47A.

  14. Gains arising as a result of any transfer by way of conversion of bonds (FCEBS) into shares or debentures of any company w.e.f. the A .Y. 2008-2009 (Section 47(xa).

  15. Transfer involved in a scheme for lending of any securities under an agreement or arrangement subject to the guidelines issued by the SEBI in this r’egard, which the assessee has entered with the borrower of such securities, so that it is not treated as a transfer in order to attract the levy of capital gains tax, as per Section 47(xv).

  16. Capital gains arising from the transfer of an agricultural land which was used by the assessee or a parent of his for agricultural purposes, and invested in the purchase of any other agricultural land for agricultural purposes within the next two years. This would enable the assessee to have complete exemption from income-tax on capital gains if the amount of capital gains is equal to or less than the cost of the new asset, as per Section 54B.

  17. Capital gains out of any transfer of a capital asset in a transaction of reverse mortgage as notified by Central Government as per new Section 47 (xvi) from the A.Y. 2008-2009.

  18. Capital Gains on conversion of Partnership firm to LLP and conversion of a private limited company to LLP.

The Finance Act, 2001, had, w.e.f. the A.Y. 2002-2003 provided that the long-term capital gains on transfer of listed securities or units of a mutual fund or the UTI would be exempt from tax to the extent such capital gain is invested in equity shares forming part of an eligible issue made by a public company, and offered for subscription to public. There would be a lock-in-period of one year and if the newly acquired shares are sold or transferred during this period, the capital gains from the original asset would be charged to tax in the year of sale of transfer. Where the cost of the new equity shares has been taken into account for the purposes of this section, a deduction from the amount of income tax with reference to such cost would not be allowed under Section 88.
 
Capital Gain of an NRI could be Completely Exempt from Income Tax
1. Exemption of Long-Term Capital Gains regarding Residential House Property (Section 54)
2. Exemption of Long-Term Capital Gains from any Capital Asset On Investment In House Property (Section 54F)
3. Exemption of Long-Term Capital Gains On Investment In Bonds of NHAI & REC
4. Exemption to facilitate the Conversion Of Partnership Firm into a Company
5. Exemption from the Levy Of Capital Gains Tax to facilitate Conversion Of Sole Proprietary Concern Into A Company
6. Computation of Capital Gains In Real Estate Transactions
7. Other Important Exemptions Regarding Capital Gains Available to NRI
8. Cost Inflation Index And Computation Of Capital Gains in case of NRI
9. Reduction Of Tax Rate On Long-Term Capital Gains In Regard To Shares And Securities
10. Concessional Rate Of Tax On Income From Certain Global Depository Receipts
11.Tax Treatment Of Capital Gain On Sale Of Shares, Debentures, Etc. Received Under ESOP
12.Provisions Relating To Set-Off Of Long-Term Capital Loss And Carry Forward Thereof ModifiedSections 70 and 74
13. Exemption Of Long-Term Capital Gains On Securities And Lower Tax On Short-Term Capital Gains
14. Issue of Foreign Currency Exchangeable Bonds Scheme, 2008
15. Miscellaneous provisions’ regarding Capital Gains in case of NRI
   
   
   
   
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