Capital gain on share

Dear Lina,

# 1 - Taxability is to be considered in income tax on basis of residential status as per income tax act & not your citizenship status.

# 2 - When its about capital gain, it will be taxed as per the provisions of income tax act for the PY in which capital gain occured.

Your Query : how the long term of capital gain on equity shares is treated for NRI who was holding the shares long back before he became NRI.

Reply: The original cost (subject to further benefit of indexation) will be allowed as the cost of acquisition.

If the shares were sold through the Stock Echange, the Capital gains may qualify for  exemption  under Section 10 (36) which provides as under:

(36) any income arising from the transfer of a long-term capital asset, being an eligible equity share in a company purchased on or after the 1st day of March, 2003 and before the 1st day of March, 2004 and held for a period of twelve months or more.

Explanation.—For the purposes of this clause, "eligible equity share" means,—

  (i) any equity share in a company being a constituent of BSE-500 Index of the Stock Exchange, Mumbai as on the 1st day of March, 2003 and the transactions of purchase and sale of such equity share are entered into on a recognised stock exchange in India;

 (ii) any equity share in a company allotted through a public issue on or after the 1st day of March, 2003 and listed in a recognised stock exchange in India before the 1st day of March, 2004 and the transaction of sale of such share is entered into on a recognised stock exchange in India;