Capital gains arising from share sale in India are taxable



I live in Australia and have equity shares in India. I want to book profits on these shares now. How will I be taxed?

—Roger Patel

Capital gains arising from sale of shares of an Indian company are taxable in India. Taxability will depend on the following factors:

 nature of asset

 holding period

residential status of seller.

Capital gain on sale of equity shares listed on a recognised stock exchange in India will be classified as long term if held for more than 12 months.

Long-term capital gains (LTCG) from sale of listed equity shares are tax exempt, provided securities transaction tax (STT) has been paid. Short-term capital gain (STCG) on sale of listed equity shares is taxable at 15%, plus applicable surcharge and education cess, provided STT has been paid; an effective rate of 17.77%. Capital gains on sale of unlisted shares will be classified as long term, if held for more than 24 months. STCG on sale of unlisted equity shares is taxable at applicable marginal tax rate plus applicable surcharge and education cess. The maximum marginal tax rate is 35.535%, if the total taxable income is more than Rs.1 crore. LTCG from unlisted shares, earned by a non-resident Indian (NRI), is taxed at 10% plus the applicable surcharge and education cess, without the benefit of indexation. Thus, it is taxed at an effective rate of 11.85%. In your situation, as you are away from India, you are most likely to qualify as non-resident in India.

Residential status depends on your physical presence in India, and needs to be determined at the end of the financial year.

If you had purchased the equity shares before leaving India, the gains would be taxed at:

 0%, if the shares are listed

 10% (without indexation), if shares are unlisted.

Tax exemption can be availed if the LTCG is re-invested in specified bonds or a residential house in India. STCG on unlisted shares is taxable at the applicable slab rates.

I have to travel to the US two times every year, for around four months in total. I am paid a daily allowance in dollars, for my stay there, as well as my salary in India. How will I be taxed for this?

—Rohan Shreshtha

Assuming that you are a resident and ordinarily resident for tax purposes in India, you will be taxable in India on your total salary, as well as the daily allowance in dollars.

The allowance can exclude the amount—supported by proof of actual expenditure—that represents ordinary daily living charges while away from your normal place of work.

If you paid any taxes in the US on salary attributable to services rendered in the US, based on the days you are physically present in the US, then such tax paid may be claimed as foreign tax credit against Indian taxes under the India-US Double Taxation Avoidance Agreement (DTAA).

Specific fact evaluation is recommended.