Ans.
The rate
of tax on Capital Gains arising on sale of following Capital Assets to a Non- Resident
shall be as under:-
Capital Asset
|
STCG*
|
LTCG* (Refer Note 4)
|
Equity
shares
|
Listed Shares
|
15%
[provided Securities transaction tax (STT)
is paid on sale of shares**]
|
10%#
(with
Grandfathering: Refer Note-1 below)
(provided STT paid on sale as well as on acquisition of shares, subject to exceptions**)
|
Listed
Shares (STT is not paid and not covered under exceptions for STT payment)
|
As per slab
rates of tax$
|
20% (Indexation) 10% (Without indexation)
|
Unlisted Shares
|
As per slab
rates of tax$
|
10%
(Without
indexation and no benefit of foreign
exchange fluctuation)
|
Units of Mutual Funds
|
Equity
oriented Mutual Fund( STT
is paid on sale) (Note
2)
|
15%
|
10%#
(with
Grandfathering: Refer Note-1 below)
|
Debt
Mutual Funds, Specified Mutual Funds acquired before April 1, 2023), Equity
Oriented Mutual Funds (STT not paid on sale) [Listed]- (Note-2)
|
As per slab rates$
|
20%
(Indexation)
|
Specified Mutual Funds acquired on
or after April 1, 2023 (Deemed STCG) (Note 2)
|
From FY 2023-24,
Slab rate of tax$
|
Not applicable
|
Bonds
|
Listed Bonds (Other than Zero Coupon bonds, Sovereign Gold Bonds and
Capital Indexed Bonds)
|
As per slab
rates$
|
10%
(Without
indexation)
|
Debentures
|
Listed Debentures (other than Market Linked Debentures)
|
As per slab rates$
|
10%
(Without indexation)
|
Unlisted Debentures
|
As per slab rates$
|
10%
(Without
indexation and no benefit of foreign
exchange fluctuation)
|
Market Linked Debentures (Note-3)
|
From FY 2023-24,
Slab rate$
|
Not Applicable
|
* Plus applicable Surcharge and Health and education
cess on above rate of Income-tax.
**
Condition of STT as referred above is not applicable where transaction is undertaken
on a recognized stock exchange located in any International Financial Services
Centre and where the consideration for such transaction is paid or payable in
foreign currency.
# Long
term capital gain will be chargeable to tax only if such long term capital gain
in aggregate exceeds Rs. 1 Lakh.
$ Refer
FAQ-8 of FAQ on TDS and Tax liability.
Note-1:
Tax @10% on LTCG from
sale of listed equity share of a company or a unit of equity-oriented fund or a
unit of business trust was introduced from 1 April 2018. However, if capital
asset is purchased before 1 February 2018 and sold after 31 March
2018, all appreciation/gains
upto 31 January 2018 will be grandfathered and accordingly appreciation/gain amount
upto 31 January 2018 is exempted from tax. Effectively, holders of such capital
assets are liable to pay tax on LTCG only on CG over and above Fair Market
Value (FMV) as on 31 January 2018 of such capital asset.
Note-2:
·
Mutual funds are classified as under:
Nature of Mutual
Fund
|
Percentage of
investment
|
Specified
|
Investment of Less
than or equal to 35% of Total proceeds in equity shares of domestic
company
|
Debt
|
Investment of less
than 65% but more than 35% of its proceeds in equity shares of listed
domestic company
|
Equity oriented
|
i. In case where
the fund invests in units of another fund which is traded on recognized stock
exchange:
- 90% or more of its
total proceeds is invested in other fund, and
- Other fund also
invest 90% or more of its total proceeds in the equity share of domestic
companies listed on a recognized stock exchange
and
ii. In any other
case, 65% or more of its proceeds is invested in equity share of domestic
companies listed on a recognized stock exchange
|
· As per recent amendment , Benefit of Indexation for the calculation of
Long-term capital gains on “Specified Mutual Funds” will not be available
for Investment made on or after April 1, 2023, and Gain arising from such type
of Mutual fund will attract tax as per Normal tax rate as per slab applicable
to Individual.
Note-3:
· "Market Linked Debenture" means a security by whatever name
called, which has an underlying principle component in the form of a debt
security and where the returns are linked to market returns on other underlying
securities or indices and include any security classified or regulated as a
market linked debenture by the Securities and Exchange Board of India;
· As per recent amendment, Capital gain arising on Sale of Market Linked
Debentures sold on/after April 1, 2023, shall be deemed as short-term capital
gain. Therefore, no Benefit of Indexation shall be available.
Note 4:
When analyzing the tax
implications of long-term capital gains, it's crucial to consider the
computational mechanism stipulated under the Income Tax Act. The rates
presented in the table above adhere to the Normal Income tax provisions.
Nevertheless, Non-Resident Indians have the flexibility to choose a special
taxation regime for their long-term capital gains from specified assets, as
detailed in the tax rates specified within that particular regime. One may
refer to "Special provisions relating to Taxation of Income of NRI"
under our services.