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Debentures of an Indian Company by Non Residents

Debentures of an Indian Company by Non Residents

In cases where shares or debentures of Indian Companies are purchased by Non-residents in foreign currency, the entire computation of capital gains is done by converting the relevant figures of full value of consideration, cost of acquisition etc. into the same foreign currency. The capital gains is also determined in that foreign currency. The capital gains thus determined in the foreign currency is then converted into Indian rupees for the purpose of determining the capital gains liability. In computing the Capital Gains, even if it is LTCG, no indexation will be given for cost of acquisition or cost of improvement.

Compulsory Acquisition of Assets under any Law

Transfer includes compulsory acquisition of a property under any Law. In such cases, settlement of the amount of compensation usually takes a long time. The compensation is initially fixed by the Land Acquisition Officer and is subject to appeal and re-determination by courts.

The compensation amount may vary as the case progresses from one authority to another. The transferor may get paid in installments- as and when a higher authority awards further compensation.

In cases of compulsory acquisition of an asset, the Capital Gains is determined on the actual receipt of compensation and not on the accrual basis. The Capital Gains is computed by taking the compensation received in the first instance as the full value of consideration. As and when any further compensation is received, the same would be brought to tax as capital gains of the year in which such further compensation is received.

As the deductions in computing the capital gains are considered while computing the capital gains in the initial year, no further deductions are allowed in the subsequent calculations on account of cost of acquisition etc.

In case the compensation is reduced subsequently, the Capital Gains for the relevant year would be recomputed taking reduced compensation as the full value of consideration.

The time period for making investments in a house, in shares, etc. eligible for deduction from LTCG would be counted from the date of receipt of the compensation.

Debentures of an Indian Company by Non Residents

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