How sale of foreign shares is taxed in India
What will be the tax applicability and the conversion rates if an Indian resident sells his shares that are listed on the US stock exchange? Can the resident gets both conversion and indexation benefit on such a sale? —Name withheld on request It is assumed that the person selling the shares qualifies as a Resident and Ordinarily Resident in India. Any gains or loss arising from transfer of the shares is chargeable to tax as capital gain or capital loss.
The taxability would further depend on whether the capital gain or loss is classified as short term or long term. Foreign listed shares (not being a share listed on a recognized stock exchange in India), are considered to be long term capital asset, if such shares are held for more than 24 months before sale and any gain or loss from such sale, shall accordingly be considered as long-term capital gain or loss (LTCG/L).
If such shares are held for 24 months or less, then the same shall be considered as short-term capital gain or loss (STCG/L). The LTCG on foreign shares is taxable at 20%, besides the applicable surcharge and cess.
The benefit of cost inflation index can be applied to the cost of acquisition while calculating taxable LTCG/L. STCG is taxable at the applicable tax rates for the individual (plus applicable surcharge and cess).
Further, for the purpose of conversion of income from capital gains (both STCG/L and LTCG/L) earned in foreign currency to rupees, telegraphic transfer buying rate as adopted by State Bank of India as on the last day of the month, immediately preceding the month in which the shares are transferred, shall be considered. In case of LTCG, exemptions if any available under Section 54F of the Income-tax Act, towards investment in a
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