NRIs CORNER - LONG / SHORT TERM CAPITAL GAIN ON SALE OF SHARES, MUTUAL FUNDS, DEBENTURES & SECURITIES

An Income-tax exemption as regards Long Term Capital Gains [LTCG] earned from Sale of listed shares traded on stock exchange as also equity mutual funds which are subjected to security transaction tax are exempt upto Rs. 1 lakh 25 thousand  whereas other gains are taxed at various rates. Salient features of exemption and tax are :

1.Capital Gains - Meaning:

.01  Profits and gains earned upon Sale of any Shares , Debentures, Mutual Funds and other Securities as also other Movable or Immovable assets are taxed under the head of "Capital Gains" under the Income Tax Act, 1961 [ I.T.Act ].

.02  Gains on Shares of a Company or Equity or Balanced schemes of Mutual Funds are defined as LTCG if the same are held for more than 12 months. Debt schemes of Mutual Funds are defined as LTCG if the same are held for more than 36 months. 

.03  Gains of said Shares or Mutual Funds held for 12 months or less are classified as "Short Term Capital Gains (STCG)" and taxed at rate of:

.01 15% for any transfer which takes place before 23rd July, 2024 and
 
.02 20% for any transfer which takes place on or after 23rd July, 2024

2.Tax Exemption:

.01  Long Term Capital Gains [ LTCG ] arising from Sale of Listed Shares or Equity Schemes of Indian Mutual Funds which are subject to Securities Transaction Tax [ STT ] are totally exempt from tax upto Rs. 1 lakh 25 thousand. Capital Gain exceeding Rs. 1 Lakh 25 thousand  are chargeable to tax at:

.01 10% for any transfer which takes place before 23rd July, 2024 and 

.02 12.5% for any transfer which takes place on or after 23rd July, 2024

3.Conditions:

.01 The Sale of Listed Shares or Equity Mutual Funds should have been subjected to STT and

.02 Shares or Equity Mutual Funds should have been sold on floor of Stock Exchange.

4.Tax Rates:

.01  LTCG of listed equity shares and equity schemes of mutual funds subject to security transaction tax (STT) are exempt from tax upto Rs.1 Lakh 25 thousand.

.02  LTCG from securities listed in India, Units of Indian Mutual Funds other than Equity Oriented Mutual Funds and Zero Coupon Bonds shall be taxed at:

.01 20% after indexation for any transfer which takes place before 23rd July, 2024 and.

.02 12.5% before indexation for any transfer which takes place on or after 23rd July, 2024

.03  LTCG of unlisted securities and shares of private limited company shall be tax at:

        .01 10% without benefit of indexation for any transfer which takes place before 23rd July, 2024 and 

 .02 12.5% for any transfer which takes place on or after 23rd July, 2024 

.04  Other LTCG are taxed at 20% after indexation.

.05  STCG of equity shares and equity schemes of MFs subjected to STT are taxed at:

        .01 15% for any transfer which takes place before 23rd July, 2024 and 

.02  20% for any transfer which takes place on or after 23rd July, 2024

.06  STCG of other assets are taxed at normal rates of applicable tax on total income

5.Capital Gains - Computation:

.01  Capital Gains are arrived at by deducting actual cost/indexed cost from the sale price. 

.02  Benefit of Indexation is not available to NRIs in case of Unlisted Securities, Shares of Private Limited Company and listed Equity Shares and Equity Schemes of Mutual Funds

6.Disadvantage NRIs:

.01 Non Resident are at a disadvantage as against residents, as basic threshold exemption limit is not deductible while computing LTCG of all assets or STCG  of Listed Shares or Mutual Fund Units in case of Non-Residents.

.02 Thus a Non-Resident will be paying tax on gross amount of said LTCG or STCG irrespective of basic threshold exempt limit of INR 2,50,000/-. under old tax regime and INR 3,00,000/- under new tax regime.