If a non-resident acquires shares in, or debentures of, an Indian company by utilizing foreign currency, the gain will be calculated in the same foreign currency, which was initially utilized in acquiring shares/debentures. After calculating capital gain in foreign currency, it will be converted into Indian currency.
The aforesaid rule is not optional but it is compulsory and applicable whether the asset is short-term or long-term. The benefit of indexation is not available, even if the asset is long-term.
Capital Gain will now be computed as under :
| Ffull value of consideration (converted into foreign currency at average TT buying and TT selling rate on date of sale) |
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Less: (i) expenses on transfer (converted into foreign currency at average TT buying and TT selling rate on the date of sale) |
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(ii) cost of acquisition (converted into foreign currency at average TT buying and TT selling rate on the date of acquisition) |
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Capital gain in foreign currency |
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Notes:
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Telegraphic Transfer (TT) buying/selling rates in relation to a foreign currency is the rate of exchange adopted by the State Bank of India for purchasing or selling such currency, where such currency is made available by that bank through Telegraphic Transfer (TT).
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The transferor should be a non-resident at the time of transfer. Non-resident includes a foreign company who is non-resident.
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This proviso is not applicable to units of UTI and mutual funds.
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The shares and debentures (whether listed or non-listed) of Indian companies only are covered under this proviso. Indian company shall include Government company. However, bonds of Central Government/State Government and RBI are not covered for this purpose.
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The first proviso to section 48 is mandatory. Hence the non-resident covered by this proviso is not allowed to opt for indexation of cost (i.e. 2nd proviso to section 48).
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