Capital Gains In Case Of Non-Residents - FIRST PROVISO TO SECTION 48 AND RULE 115A - Income Tax - Ready Reckoner - Income Tax

First Proviso to Section 48 : Capital Gains in case of Non-Residents In case of an assessee who is a non-resident (including foreign company) the capital gain arising from the transfer of shares or debentures in an Indian company, Shall be computed by converting the cost of acquisition of the asset the expenditure incurred wholly and exclusively in connection with such transfer and sale consideration received or accruing as a result of transfer of capital asset into the same foreign currency as was initially utilized in the purchase of such shares or debentures. The capital gain so computed in the foreign currency shall be reconverted into Indian currency. The above said manner of computation of capital gains shall apply to capital gains arising from every reinvestment thereafter in and the sale of, shares or debentures in Indian company. For the applicability of the first proviso, the shares or debentures should be purchased in the foreign currency or it should be a case of reinvestment. Notes: Units of Mutual fund and Government bonds are not covered by First Proviso to Section 48 First proviso applies to STCG and LTCG First proviso is mandatory Benefit of indexation is not given where First proviso applies. Provided further that where LTCG arises from transfer of long term capital asset except the capital gain arising to a non-resident from transfer of shares or debentures of an Indian Company, then indexed cost of acquisition and improvement shall be applied. Provided also that nothing contained in the second proviso shall apply to the long-term capital gain arising from the transfer of a long-term capital asset, being a bond or debenture other than- (a) capital indexed bonds issued by the Government; or (b) Sovereign Gold Bond issued by the Reserve Bank of India under the Sovereign Gold Bond Scheme, 2015 Provided also that in case of an assessee being a non-resident, any gains arising on account of appreciation of rupee against a foreign currency at the time of redemption of rupee denominated bond of an Indian company subscribed by him, shall be ignored for the purposes of computation of full value of consideration under this section [substituted by FA, 2016 , w.e.f. 1-4-2017] Provided also that nothing contained in the first and second provisos shall apply to the capital gains arising from the transfer of a long-term capital asset being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust referred to in section 112A . [ Inserted vide THE FINANCE ACT, 2018 w.e.f. 1st day of April, 2018 ] RULE 115A : METHOD OF CONVERSION Telegraphic transfer Buying/ Selling rate COA Average of TTBR and TTSR On the date of acquisition Expenditure Average of TTBR and TTSR On the date of transfer Sale Consideration Average of TTBR and TTSR On the date of transfer CB into Indian Currency TTBR On the date of transfer Highlights of the proviso: Non-resident includes Foreign Company. The shares or debentures should be purchased in the foreign currency or it should be a case of reinvestment. The shares, debentures and bonds of a Government company are also covered by the first proviso. However, the bonds of Central Government, State Government and RBI are not covered. Debentures include bonds. Units of UTI and Mutual Funds not covered here. The First Proviso to Section 48 is mandatory. A non-resident cannot opt for the second proviso to section 48 if his case falls in the first proviso of section 48 . No indexation where this proviso applies. Assessee should be a non-resident in the previous year in which shares or debentures were sold. Short term capital gains as well as long term capital gains both computed here.