Capital Gains

Special provisions for a non resident

The Income Tax Act lays down certain conditions in the cases of non resident who are not covered by section 115AC and section 115AD of the Act. These conditions are enumerated below .

a) in the case where a non resident acquires shares in or debentures of an Indian Company in foreign currency, the cost of acquisition, the expenditure incurred wholly and exclusively in connection with the transfer of such assets and the full value of the consideration received or accruing as a result of the transfer of the capital asset shall be computed by converting the expenses in the same foreign currency as was initially utilised to acquire the shares or debentures. Thereafter the capital gains shall be computed in the foreign currency and reconverted into Indian currency. This procedure provides a protection against the fluctuation in the currency market of the Indian rupee and protects the interests of the non resident.

b) in the case of a non resident where the long term capital gains are in respect of the assets mentioned above, no indexation of cost of acquisition or of the cost of improvement is permissible.

For the purposes of conversion of the cost of acquisition , the expenditure incurred for transfer , the full value of the consideration received and the capital gains , the rate of exchange to be adopted shall be the average of the telegraphic transfer buying rate and the telegraphic transfer selling rate adopted by the State Bank of India on the specified dates in respect of the said foreign currency.