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Special provision related to long-term capital gains

Special provision related to long-term capital gains

For long-term capital gains made from the sale of transfer of these foreign assets, there is no benefit of indexation and no deductions allowed under Section 80. But you can avail an exemption on the profit under Section 115 F when the profit is reinvested back into:

  • Shares in an Indian company
  • Debentures of an Indian public company
  • Deposits with banks and Indian public companies
  • Central Government securities
  • NSC VI and VII issues

In this case, capital gains are exempt proportionately if cost of new asset is less than net consideration. Remember, if the new asset purchased is transferred or sold back within 3 years, then the profit exempted will be added to the income in the year of sale/transfer.

The benefits above may be available to the NRI even when he/she becomes a resident – until such an asset is converted to money AND upon submission of a declaration for the application of the special provisions to the Assessing Officer by the NRI.

The NRI may choose to opt out of these special provisions and in that case the income (investment income amd LTCG) will be charged to tax under the usual provisions of the Income Tax Act.

What are the investments that qualify for special treatment?

Income derived from the following Indian assets acquired in foreign currency:

  • Shares in a public or private Indian company
  • Debentures issued by a publicly-listed Indian company (not private)
  • Deposits with banks and public companies
  • Any security of the Central Government
  • Other assets of the Central Government as specified for this purpose in the official gazette.

No deduction under Section 80 is allowed while calculating investment income.

Special provision related to long-term capital gains

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