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Income From Capital Gains

Posted on October 01 2020



Residents are liable to capital gains tax liable to specific rules applicable. These rules determine the rate of taxation, whether such income is to be taxed or not. Capital gains tax applies to all he capital assets which have been defined as per the Section 2(14) of the Income Tax Act,1961. It should be noted that from the Assessment year 2008-09 jewellery, archaeological collections, drawing, paintings, sculptures or any other work of art has became taxable under this category.

The capital gains are restricted into short term and long term capital gains. Generally, gains are considered as long term only if the asset is held for more than 3 years with the exception in case of shares or listed securities or units of UTI/Mutual fund etc., where an asset becomes long term if it is held for more than 1 year.

The long term capital gains are chargeable at 20 % rate of tax on the gains and in certain stated cases the rate is 10 %. The gains are calculated by deducting the recorded cost of acquiring only in the long term from the sales consideration. In the case of short term gains, the same are calculated at the normal rates of 30% + surcharge and education cess.

Long term capital gains arising on the transfer of global depository receipts which were the issues in accordance with the notified Employee Stock option scheme then purchased in the foreign currency by a resident employee of an Indian company, are liable to tax of 10 %. Benefits of the indexation and calculating the long term capital gains in the foreign currency and then reconverting them into the Indian currency which are not applicable.


Non Residents

Non Residents are liable to capital gains tax in India only in the respect of capital gains accumulating or arising or received in India including the capital gains assumed to be accumulating, arising or received in India.

In case of shares or bonds of an Indian company accomplished in the foreign currency by non residents, the cost of acquiring, expenditure obtained wholly and exclusively in connection with the transfer and full value of consideration are converted back into the foreign currency and then gains are calculated and taxed at a rate of 20%. Long term capital gains arising from the sale of shares and securities through a recognised stock exchange are immune from tax.

The benefit of cost indexation is not applicable to the non resident Indians who claim for special tax rate of 10% and to other non residents where the capital gains on the transfer of shares in and bonds of, Indian companies are determined in the foreign currency.
Tax Assist is a professional income tax consultancy in India for both corporate houses and individual tax payers; the latter comprising Salaried Individuals, Seafarers, Professionals and Non Resident Indians. 
With the help of Tax Assist and its team of income tax professionals, taxpayers can minimize their Income Tax liability, maximize their net income and create opportunities to save for current and future needs while maintaining proper accounting standards and income tax returns which are compliant with the Law.

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