Capital Gain NRI

8/3/2019 Capital Gain NRI

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Introduction :

Non-resident persons have been given a special status under the incometax

law. Besides the general provisions for computation of long-term capital

gains and the tax liability thereon, contained in section 48 and section

112,Chapter XII-A (comprising of sections 115C to 115-I) contains specialprovisions relating to certain incomes of non-resident Indians (NRIs) contains

special provisions relating to certain incomes of non-resident Indians (NRIs).

Section 115AC makes provision for tax on income from bonds or shares

purchased in foreign currency or capital gains arising from their transfer'.

Besides, the provisions of Section 115A have been extended to non-residents,

besides foreign companies, regarding tax on dividends, interest on foreign

currency debts and income from units of mutual fund. In this Chapter we

shall discuss the various provisions relating to tax on capital gains arising tonon-resident.

Non-Residents:

Under the Income-Tax Act, a person is non-resident in India in any previous

year, if he satisfies any of the following conditions:

(a) If he was in India for less than 365 during the four preceding years and

for less than 182 days during the previous year; or

(b) if he was in India for 365 days or more during the four preceding years

and for less han 60 days during the previous year.

Note :

The period of 60 days referred to in condition (b) above, shall be substituted

by 182 days, in case of an Indian citizen who leaves India in any previous

year as a member of crew of an Indian ship or for the purpose of employmentoutside India, and in case of an Indian citizen or a person of Indian origin who

is outside India and who comes on a visit to India in any previous year.

The residential status of a person is to be determined for every previous year.

A person may be resident in a previous year and non-resident in the following

year, or vice versa.


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Non-Resident Indian (NRI)

An individual who is a citizen of India or a person of Indian origin, and a 'non-resident' (according to the above definition), is called a 'non-resident Indian

(NRI)

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Incidence of tax in case of Non-Resident Person:

Non-residents (including NRI's) are liable to tax only in respect of income

which is received or is deemed to be received in India or accrues or arises or

is deemed to accrue or arise in India during the previous year.

Thus, any income received / accrued outside India will not be taxable in India

in respect of non-residents.

Remittance or Transmission of Money to India is not an Income Received in

India

It is significant to note that income received in first instance outside India and

subsequently remitted or otherwise transferred to India is not to be treated

as 'income received in India'.

Income-tax Liability of a Non-resident

A non-resident Indian having (Indian) income of more than Rs. 50,000, except

income from certain specified assets, is liable to pay income-tax at the same

rates as are applicable in case of resident assessees.


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Any income from 'long-term capital gains' arising to a non-resident is taxable

at the rate of 20%.

The balance of total income (other than long-term capital gains) is taxable at

the normal rates of income-tax for various categories of assessees. See

annexure 16.1

Computation of Capital Gains arising to Non-residents:

In the present scheme of the Income-tax Act, three sets of provisions exist for

computation and taxation of capital gains (and certain other incomes too)

arising to non-residents. These are-

(i) General Provisions (Sections 48 and 112) wherein the procedure for

computation of capital gains on transfer of shares/debentures is different

from that on other assets

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(ii) special Rate of Tax on Income and Capital gains from Euro Issues/ GDRs.

(Sec. 115A and 115AC).

(iii) Special Provisions for Taxation of NRIs having income from-tax Act.)

We Shall now discuss each of these provisions (insofar as they relate to

capital gains).

(i) General Provisions (Sections 48 and 122)


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Computation of Capital Gains on transfer of Shares/Debentures

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Capital gains arising from the transfer of a capital asset being shares in, or

debentures of, an Indian company shall be computed by converting the cost

of acquisition, expenditure incurred wholly and wholly and exclusively in

connection with such transfer and the full value of the consideration received

or accruing as a result of the transfer of the shares or debentures, into the

same foreign currency as was initially utilised in the purchase of the shares or

debentures, into the same foreign currency as was initially utilised in the

purchase of the shares debentures, and the capital gains so computed insuch foreign currency shall be reconverted into Indian currency. Moreover,

the aforesaid manner of computation of capital gains shall be applicable in

respect of capital gains accruing or arising from every re-investment

thereafter in (and sale of ), shares in or debentures of, an Indian company.

[Sec. 48, First Provision

This provision intends to protect non-residents from fluctuation of rupeevalue against foreign currency, in order that he pays tax only on the actual

capital gains in foreign currency and not on the gains computed in rupees.

However, in such cases the benefit of indexation will not be available for the

cost of acquisition.

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The provision has been extended w.e.f. A.Y. 1993-94 to all non-resident

assessees. (Upto A.Y. 1992-93, this benefit was available to non-resident

Indians only).

For the purposes of this provision 'foreign currency' and 'Indian currency'

shall have the same meanings as assigned to them under the FERA. Thus,


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'foreign currency' means any currency other than Indian currency and 'Indian

currency' means currency which is expressed or drawn in Indian rupees but

does not include special bank notes and special one rupee notes issued under

section 28A of the Reserve Bank of India Act, 1934.

The conversion of Indian currency into foreign currency :

The conversion of Indian currency into foreign currency and the reconversion

of foreign currency into Indian currency shall be at the rates of exchange

prescribed in this behalf by the CBDT, viz. -

(a) the cost of acquisition of the capital asset shall be converted at theaverage of the telegraphic transfer (T.T.) buying rate and T.T. selling rate of

the foreign currency initially utilised in the purchase of the said asset as on

the date of its acquisition.

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(b) the transfer expenses and the full value of consideration shall be

converted at average of the T.T.buying rate and T.T. selling rate of theforeign currency initially utilised in the purchase of the said asset, as on the

date of transfer of the capital asset.

(c)capital gains computed in the foreign currency, shall be converted into

rupees, at the T.T. buying rate of such foreign currency, as on the date of

transfer.

Computation of Capital Gains on transfer of other Capital Assets

Capital gains arising from the transfer of capital assets other than shares in,

or debentures of, an Indian company, shall be computed in the usual manner,


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by deducting cost of improvement and expenditure incurred in relation to

such transfer from the total sale consideration. However, for computing

capital gains on transfer of 'long-term capital assets'. 'Indexed Cost

Acquisition' and 'Indexed Cost of Improvement' shall be considered.

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Rates of Taxes on Capital Gains:

FOR LONG-TERM CAPITAL GAINS

Income arising from 'Short-term Capital Gains' is included in the gross total

income of the gross total income of the assessee and after allowing

deductions under Chapter VI-A, the total income is subject to tax at the

normal rates in force for that assessment year. (See Annexure16.1). Rebate

under Section 88 is available from the tax computed on the total income in

respect of deposits/payments made in the approved schemes and

instruments.

FOR LONG-TERM CAPITAL GAINS

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As per section 112 long-term capital gains are subject to a flat rate of

income-tax @20%.

However, in case of long-term capital gains arising on transfer of listed

securities (except shares and debentures) or units of UTI or mutual funds, the

amount of tax shall be restricted to 10% of the capital gain computed without

giving the benefit of indexation.


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Deductions under Chapter VI-A and rebate under Section 88 will not be

available in respect of long-term capital gains and the tax payable thereon.

Income other than long-term capital gains will be subject to tax at the normal

rates in force.

In the case of an individual or a Hindu undivided family the basic exemption

limit of Rs. 50,000 shall first be allowed against total income as shall be

allowed against such long-term capital gains. For details refer chapter

'Computation of Capital Gains and Tax liability'.

For examples on computation of capital gains refer para 'Computation long-

Term Capital Gains Relating to a Foreign Exchange Asset in the Non-residentIndians (NRIs).

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(ii) Special Rate of Tax on Income and Capital Gains from Euro Issues/GDRs

[Secs. 115A and 115AC ]

With a view to increasing the inflow of foreign exchange into India, the

Government has permitted issue of convertible bonds and equity shares

abroad, by established Indian companies. The bonds/shares shall be

denominated in foreign currency and shall be subject to a special treatment

under the Income-tax Act.Besides, non-residents have now been placed at

par with foreign companies, in respect of taxation of dividends, interest on

foreign currency debts and income from units of notified mutual funds.

The special provisions are applicable to all non-residents in respect of their

income by way of :

(a) dividends [which have not been subjected to additional incometax in the

hands of company u/s 115-O] [other than those mentioned in clause (d)

below];


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(b) interest received from Government or an Indian concern on foreign

currency debts;

(c) income received in respect of units, purchased in foreign currency, of a

mutual fund notified u/s 10(23D) or of the Unit Trust of India

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(d) interest or dividends [which have not been subjected to additional

Income-tax in the hands of company u/s 115-O] in respect of specified bonds

or shares (see below) or inrespect of bonds or shares of a public sector

company sold by the Govt. to the non-residents in foreign currency; or

(e) long-term capital gains arising on transfer of the bonds/shares aforesaid.

Specified bonds or shares :

The provision shall apply to the bonds or shares issued by an Indian company

in accordance with the specified scheme [i.e. Foreign Currency Convertible

Bonds and Ordinary Shares (through Depository Receipt Mechanism)

Scheme, 1993] of the Central Government and purchased by a non-resident

assessee in foreign currency. These are popularly known as Euro

Issues/GDRs.

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This provision is also applicable in case of shares or bonds in an

amalgamated or resulting company, acquired in accordance with the above

scheme. [Sec. 115AC}


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Transfer of bonds or shares to another non-resident :

A transfer of the specified bonds or shares, made outside India to another

non-resident, shall not be regarded as a transfer [vide section 47 (viia)].

Thus. no tax shall be payable on capital gains arising from such transfer.

No deductions to be allowed :

While computing the aforesaid incomes (whether by way of interest or

dividends or long-term capital gains), the following points must be considered

:

(1) In computing the interest or dividend income no deduction in respect of

any expenditure shall be allowed under sections 28 to 44C or under section

57 of the Act;

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(2) In computing the long-term capital gains, the protection against

exchange rate fluctuation and against inflation available under the first and

second provisos to section 48, shall not be allowed;

(3) No deduction under Chapter VI-A shall be allowed where the gross total

income consists only of the incomes as aforesaid. In other cases, the

deduction under Chapter VI-A shall be allowed from the gross total income as

reduced by such incomes, as if such reduced amount was the gross total

income as reduced by such incomes, as if such reduced amount was the

gross total income of the assessee.

(4) The unabsorbed capital losses brought forward from earlier years shall

be allowed to be set off against ' long-term capital gains' from specified

bonds/shares.


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Tax Payable :

In case of a non-resident, the income-tax payable shall be the aggregate of-

(i) 20% of the income specified in clauses (a), (b) and (c) above;

(ii) 10% of the interest or dividend income in respect of specified bonds orshares mentioned in clause (d) above

(iii) 10% of the long-term capital gains arising from the transfer of the

afordable shares mentioned in clause (e) above; and

(iv) income-tax chargeable on the total income as reduced by the amount of

incomes referred to in clauses (a) to (e) above, at the normal rates.

Return of Income :

A non-resident is not required to furnish his return income u/s 139 (1) if-

(a) his total income for the previous year consists only of incomes specified in

clauses(a) to (e) above;and

(b) the tax has been deducted at source on such income in accordance with

the relevant provisions. [Sec. 115A(5) and 115AC(4)]


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Sections 115A and 115AC are Mandaroty for Non-residents (Other than

NRI's)]

The provisions of sections 115A and 115AC (for taxation of dividends, interest

on foreign currency debts, income received in respect of units of a mutual

fund, income from bonds or shares purchased in foreign currency or capital

gains arising from their transfer) are mandatory for non-residents (other than

non-resident Indians). Non-resident Indians, however, have an option of

being assessed either under the special provisions of Chapter XII-A or under

the provisions of sections 115A and 115AC. In their case, the provisions of

sections 48 and 112 shall apply only where sections 115A and/or 115AC are

not applicable and option to be assessed under Chapter XII-A is not

exercised.

(iii) Special Provisions for Taxation of NRIs having Income from Foreign

Exchange Assets (Chapter XII-A of Income -tax Act)

Applicability

The special provisions of taxation contained in Chapter XII-A are applicable to

a non-resident Indian' who is an individual, being a citizen of India or a personof Indian origin, not resident in India, having 'investment income' or 'long-

term capital gains' or both from a 'foreign exchange asset' [Sec. 115C(e)]

'Investment Income' means income derived from a foreign exchange asset

[but excludes dividends subjected to additional income-tax in the hands of

the company u/s 115-O.] 'Capital gains' means a capital gain from long-term

foreign exchange asset. 'Foreign exchange asset' means any specified asset

acquired or purchased with or subscribed to in 'convertible foreign exchange'

(as defined under FERA, 1973). the specified assets are: (i) shares in an

Indian company. (ii) debentures issued bay public limited Indian company.

(iii) deposits with a public limited Indian company, (iv) securities of the

Central Government, and (v) any other assets which the Central Government

may notify in the Official Gazette in this behalf (NSC VI and VII issues had

been notified under this provision; both of these issues have since been

discontinued).


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Income on shares in Indian companies, allotted in consideration for the

machinery and plant delivered abroad, will attract liability to tax w.e.f.

1.5.1984.

This method is evidently intended to benefit the NRIs. In order that the

benefit may be availed of. the investor has to be a non-resident Indian. as

defined under the Income-tax Act. 1961 and not under the FERA. 1973.

Deductions Not Allowable:

(a) In computing the investment income (i.e. interest or dividend income

derived from a foreign exchange asset), no deduction in respect of any

expenditure or allowance shall be allowed under any provisions of this Act.

(b) In computing the long-term capital gains (arising on transfer of a foreign

exchange asset) the benefit of 'indexation' available under second proviso

to section 48 shall not be available on such long-term capital gains.

However, in case of shares/debentures of an Indian company the protection

against exchange rate fluctuation (contemplated vide section 48 first proviso)

shall continue to be available. For 'computation of capital gains on transfer of

shares/debentures' refer to 'General Provisions (sections 48 and 112)' above

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(c) Where the gross total income consists only of investment income orlong-term capital gains (in respect of foreign exchange assets) or both, no

deduction under Chapter VI-A shall be allowed. In other cases, the gross total

income shall be reduced by such incomes and the deductions under Chapter

VI-A shall be allowed against the gross total income so reduced [Sec. 115D]


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Exemption from Capital Gains:

No capital gain tax is attracted on long-term capital gains arising from

transfer of foreign exchange asset if the net consideration for the transfer is

invested within six months in any specified asset or deposited in notified

savings certificates. If investment in aforesaid specified assets is less than

the net consideration, the exemption will be allowed on proportionate basis.

In case where the new (specified) asset is transferred or converted into

money within a period of three years from the date of its acquisition, the

amount of capital gain exempted earlier will be regarded as long-term capital

gains of the year in which the new asset is transferred o converted into

money.

The 'new assets' in which the net consideration should be invested, are

specified below : (vide Section 115E)

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-Shares in an Indian company

- Debentures issued by an Indian company which is not a private company

- Deposits with an Indian company which is not a private company.

- Any security issued by the Central Government.

- Any savings certificates notified by the Central Government. [The national

Savings Certificates (VI and VII Issues) have been notified for this purpose

vide Notification No. SO 653(E), dated 8.9.1982 but the same have been

discontinued].


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- Any other asset that the Central Government may notify for this purpose

[No such asset has been notified so far ].

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Prior to 1.4.1989, deposit in the Non-resident (External) Account was also

included as one of the 'new assets',but this has since been withdrawn. From

the assessment year 1989-90 onwards, deposit of consideration in this

Account will not entitle the assessee to the exemption.

The expression 'net consideration' means the full value of the consideration

received or accruing as a result of the transfer, as reduced by anyexpenditure incurred wholly and exclusively in connection with such transfer.

No other deduction will be allowed in determining the net consideration.

Since the transferred asset is a movable asset [shares or debentures], the

only conceivable expenditure that can be deducted will be brokerage or

commission paid, or stamp duty paid for the transfer.

Quantum of Exemption

Where the entire net consideration is reinvested in a new asset, the entire

capital gain is exempt from tax. Where only a portion of the net

consideration is reinvested. then the exemption from tax is allowed on

proportionate basis.

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Arithmetically speaking.

Amount of Cost of new 'specified asset' x Capital Gain

Exemption =-----------------------------------------------------


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Net consideration for transfer of 'foreign exchange asset'.

Simultaneous Exemption u/s 54E

For transfers of foreign exchange assets effected before 1.4.1992,

simultaneous exemption u/s 54E (along with exemption u/s 115F) would be

available provided the conditions laid down in the respective provisions were

satisfied.

From A.Y. 1993-94, however, exemption u/s 54E is not available.

Rate of Tax

The investment income and long-term capital gains from [capital assets other

than foreign exchange assets are chargeable to tax at flat rate of 20%.

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W.e.f. A.Y. 1998-99 income by way of long-term capital gains from foreignexchange assets are chargeable to tax at the rate of 10%. For A.Y. 1997-98.

the rate of tax was 20%.

Option not to be assessed under this special provision

Income from foreign exchange assets and long-term capital gains arising

from such specified assets, would be treated as a separate block and charged

at the rates mentioned above. The other incomes of non-resident in India will

be treated as separate block and charged to tax in accordance with the other

provisions of the Income-tax Act. The non-resident has option to be assessed

or not to be assessed under special provision. The option will be made by a

declaration at the time of filing Income-tax Return. [Sec. 115-I]


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Non-resident when becomes Resident in India:

If a non-resident Indian becomes resident in India in the subsequent years,

the special provisions of Chapter XII-A will continue to apply in relation to the

investment income derived from specified assets except shares in an Indian

company, until the transfer or conversion (other than by transfer) into money

of such assets. [Sec. 115H]

Return of Income

A non-resident Indian is not required to furnish his return of income, if -

(a) his total income for that previous year consists only of investment

income or income by way of long-term capital gains (from foreign exchange

assets) or both ;

(b) the tax has been deducted at source on such income; and

(c) the assessee opts to be assessed under the special provisions of Chapter

XII-A. [Sec. 115G]

Other Concessions available to Foreign Companies and Offshore Funds:

(a) Transfer of shares held in an Indian Company, in a scheme of

amalgamation of foreign companies :Capital gains arising from transfer of

any shares, held in an Indian company, by the amalgamating foreigncompany to the amalgamated company, shall not be chargeable to tax, if -

(b) Tax on income from units purchased in foreign currency or capital gains

arising from their transfer to an Offshore Fund : Section 115A provides for a

special rate of tax in case of any income from units purchased in foreign


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currency on long-term capital gains arising from their transfer, to an overseas

financial corporation (offshore fund).

Deduction of tax at Source on Long-term Capital Gain on Sale of Shares or

Debentures of other specified Assets by Non-resident Individuals of Indian

Nationality / Origin

Section 195 read with Section 204 of the Income-Tax Act requires authorised

dealers to deduct income tax at source at a flat rate of 20% on long-term

capital gains accruing to an NRI on the transfer of specified assets before

remitting to him the balance sale proceeds or crediting such proceeds to his

NR(E) / FCNR Account. For this purpose the production of No Objection or

Tax Clearance Certificate from the Indian Income Tax authorities has been

dispenses with and the authorised dealers have been issued the following

guidelines before remitting such sums.

(1) The seller of shares is an NRI as defined in Chapter XII_A of the Income-

tax Act.

(2) The shares/debentures / securities (i.e. the assets specified in Chapter

XII-A of the Income-tax Act) where acquired by or on behal of the non-resident investor with repatriation benefits, in accordance with the special or

general permission of Reserve Bank, out of remittance from abroad in foreign

exchange or from the foreign origin funds held in the investor's Non-resident

(External) / FCNR account, and such assets are sold with the Reserve Bank's

specific or general permission or, in case of shares acquired under Portfolio

Investment Scheme and sold through stock exchange,the sale / transfer of

sahres is effected in accordance with Notification No. F. 10 /21 / 86-NRI Cell,

dated 10th June,1986 issued by Government of India under Section19(6) of

the Foreign Exchange RegulationAct, 1973. Where the sale of shares

/debentures acquired by the on-resident investor directly from the

companies concerned is made on repatriation basis with the specificpermission of Reserve Bank and the Bank's approval letter is produced, it will

not be necessary for authorised dealers to verify that these assets were

acquired by the seller by remittance in foreign exchange or out of foreign

exchange funds.


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(3) The bonus shares will be treated as foreign excahnge assets if the

shares on the basis of which the bonus shares have been issued are "foreign

exchange assets"as defined in Chapter XII-A of Income-tax Act.

(4) If the rights shares are purchased or subscribed to in convertible "foreign

exchange assets" and,therefore, the long-term capital gains arising on the

sale of this right will not be covered under the provisions of Chapter XII-A of

the Income-tax Act.

(5) The non-resident investor has submitted a declaration by a letter to theauthorised dealer to the effect that the asset sold by him was his bona fide

long-term capital asset and not stock-in-trade.

(6) The specified capital asset sold by the non-resident Indian was held by

him for a period of more than 36 months from the date of acquisition. For

this purpose, the date of acquisition and sale may be determined in the

following manner:

(a) In case the shares / debentures / securities were acquired by the NRI

directly from the concernedcompany / Government, the date of acquisition

will be the date ofissue as indicated in the realtive certificate.

(b) In case the assets (shares / debentures / securities) were purchased by

the NRI through stoc exchange, the date of acquisition of the asset by the NRI

(i.e. the date from which the capital asset has been "held" by him) will be the

date when the asset together with the transfer document completed in all

respect is handed overto the NRI or his agent.

(c) The date of 'transfer' of the capital asset, being a foreign exchange asset

will be the date of which the asset together with transfer documents

complete in all respects is handed over to the buyer or his agent.


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Note :

The date of acquisition / transfer in case covered by item (b) or (c) above.,

will have to be verified by the authorised dealer by examining the relevant

facts. For this purpose, besides the declaration given by NRI seller / his agent

/ broker regarding the date of acquisition / transfer, the authorised dealer

may see whether the payment for the asset was made near about the

claimed date. If ther is a considerable time-lag between the claimed date of

acquistion / transfer and the date of payment, the case will require further

examination. Thus, if the date of acquisition is very much earlier than the

date of payment or the date of transfer is long ater the date when payment is

received, the authorised dealer will have to examine the matter further and

act accordingly.

A non-resident entitled to recieve any sum on which tax is required to be

deducted at source (as stated above), may make an application in Form 15C

(for banking companies) or Form 15D (for other non-residents), to the

Assessing Officer for the grant of a certificate authorising him to receive such

sum without deduction of tax at source. The Assessing Officer shall grant a

certificate in Form 15#. The person responsible for paying such sum to the

non-resident shall make such payment without deducting tax, so long as the

certificate is in force.

The authorised dealers are also required to send within 14 days of the date of

deduction of tax, a statement in form No. 27 to the Income-tax Officer having

jurisdiction to assess the authorised dealer concerned. A statement showing

the computation of capital gains in each case, should also be sent to the

Income-tax Officer ahving jurisdiction over the authorised dealer, along with

Form No. 27.

Failure to deduct tax at source attracts a penalty u / s 271C for a sum equal

to the amount of tax not so deducted. BEsides, interest shall be chargeableon the tax deductible, till the date it is actually paid u / s 201.

The above instructions will not be applicable in cases where the shares /

debentures / securities are sold by overseas corporate bedies owned directly

or indirectly by non-residents of Indian nationality / Origin (NRIs) to the extent


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of at least 60 per cent, as also where such assets sold by NRIs on repatriation

basis were held for a period upto 36 months [12 months in case of shares of a

company or listed securities or units of UTI or a notified mutual fund]. In

such cases the instructions contained in paragraph 3 of A.D. (M.A. Series)

Circular No. 27 of 1982 will apply.

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Computation of Long-Term Capital Gains realting to a Foreign Exchange Asset

in the case of Non-resident Indians (NRIs)

For computing the long-term Capital Gains following steps may be followed:-

Step I Check that the asset which has been transferred is a "foreign exchange

asset" as defined in Chapter XII-A of the Income-tax Act, 1961.

Step II Check that the asset transferred is a capital asset and not stock-in-

trade and a declaration to that effect is submitted by the NRI.

Step III Find out the date from which the foreign exchange asset has been

'held' by the NRI.

Step IV Check whether the asset has been 'held' for more than 36 months

[12 months in case of shares of a company or listed securities or units of UTI

or a notified mutual fund] before its transfer.

Step V After the above has been checked, the capital gains on the transfer

of foreign exchange asset is to be determined by substracting from the full

value of consideration received as a result of the transfer of the asset, the

following two amounts namely:


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(i) Expenditure incurred wholly and exclusively in connection with such

transfer, for example, commission paid to a broker (if accompanied by a

receipt),

(ii) Cost of acquisition of the foreign exchange asset and the cost of any

improvement thereto.

Note 1 : In this connection, it is clarified that interest, if any, on cpaital

borrowed for acquiring the asset will not form part of the cost of acquisition

or cost of improvement of the asset.

Note 2 : If the foreign exchange asset was on any previous occasion a

subject of negotiations for its transfer, any advance or other money received

and retained in respect of such negotiations shall be deducted from the cost

in computing the cost of acquisition of the foreign exchange assets.

The following examples will illustrate as to how the long-term capital gains

are to be worked out:

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COMPUTATION OF LONG-TERM CAPITAL GAINS

Since the shares were held for more than 12 months prior to their transfer,the capital gains arising on their transfer are long-term capital gains.

Further, as the shares were subscribed to in convertible foreign exchange,

these are foreign exchange, these are foreign exchange assets. Therefore,

long-term capital gains arising on their sale are governed by the provisions of

Chapter XII-A of teh Income-tax Act, 1961. The provision of section 48, as to

indexing the cost of acquisition shall not be applicable to such transfer.

Consequently tax @20% is to be deducted by the authorised dealers before

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