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When Is No Income Tax Payable On The Long-Term Capital Gains Of Foreign Exchange Assets ?

[ Special Procedure of Assessment regarding Income of an NRI from Foreign Exchange Assets. ]

Section 115F provides for complete exemption of long-term capital gains on the transfer of foreign exchange assets in certain cases. Thus, it is provided that where, in the case of a non-resident Indian, any long- term capital gains arise from the transfer of a foreign exchange asset and the non-resident Indian has within a period of six months from the date of such transfer invested or deposited the whole or any part of the net consideration in any specified asset or in account referred to in Section 10(4) or in Savings Certificates as per Section l0(4B), then no tax is payable. Thus, if the amount of the net consideration is invested in the purchase of a new asset as specified earlier, then no income tax is leviable on such long-term capital gains. Where, however, the cost of the new asset is less than the net consideration in respect of the original asset, then income tax is to be levied on the proportionate capital gain.

The expression “net consideration” in relation to the transfer of the original asset means the full value of the consideration received or accruing as a result of the transfer of such assets as reduced by any expenditure incurred wholly and exclusively in connection with such transfer. It is also provided in sub-Section (2) of Section 115F where the net asset is transferred or converted into money within a period of three years from the date of its acquisition, the amount of capital gains arising from the transfer of the original assets not so charged under Section 45 on the basis of the cost of such new asset as provided in this Section, it would be deemed to be income chargeable under the head “capital gains” relating to the long-term capital asset of the previous year in which the new asset is transferred or converted into money. Thus, long-term capital gains can be completely income tax free if they are invested in specified assets or other assets as mentioned above. A non-resident Indian should take full advantage of this provision by adopting proper tax planning.

Special Procedure of Assessment regarding Income of an NRI from Foreign Exchange Assets
1. Special Provision Of Computation Of The Total Income Of A Non-Resident Indian
2. Who Is A Non-Resident Indian For The Purposes Of These Special Provisions?
3. Specified Foreign Exchange Assets Income From Which Is Eligible For The Special Provisions Of Assessment
4. Income Tax On Investment Income And Long-Term Capital Gains Of An NRI
5. When Is No Income Tax Payable On The Long-Term Capital Gains Of Foreign Exchange Assets?
6. A Non-Resident Indian Need Not File Any Income Tax Return In Certain Cases
7. When Does The Special Procedure Continue To Apply To A Person Even After He Becomes A Resident In India?
8. NRIs Have The Option Not To Be Governed By The Special Provisions
9. Tax Planning Guidelines For An NRI Having Income From Foreign Exchange Assets As Well As Other Income

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