Hi, How do we handle currency fluctuation while calculating Capital Gain from foreign equity (stocks)? Example if I have purchased say a NASDAQ listed stock-X with price as $100 and at the time of purchase USD-INR rate was Rs. 70. And after 3 month i sold Stock-X with price at $150 and the the time of selling USD-INR rate was 75. So on what amount i will be taxed in India, is it $150-$100? Or will it take into consideration USD-INR exchange rate as well. And I will be taxed on amount Rs. (150*75 - 100*70)? - Vineet
It should be 150*75 less 100*70 as you need to see cost at the time of purchase and hence the gain or loss because of such would even include foreign exchange gain loss.
Nothwithstanding anything contained above as per DTAA between India USA such capital gain shall be taxed in USA.
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Thank you.
Hi,
It should be 150*75 minus100*70.
Please note that you may also have to pay tax in USA as per the taxation rules in USA but you can avail foreign tax credit of the same in India. So effectively, tax paid in Usa will be reduced from the India tax liability.
- If yours residential status in India will be resident then only you will be required to pay tax on global income. In such case, fluctuation on account of foreign exchange will be incorporated in itself while calculating capital gain rupees. If any tax on such transaction is paid in USA, you will get the benefit of DTAA in India while filing the ITR.
Hello,
The gain on account of foreign exchange fluctuation would be considered with the capital gain income itself. It would be $150*Rs.75 minus $100*Rs.70.
I hope this answer satisfies your requirements.
Regards,
CA Hunny Badlani
Dear Vineet,
As per the Income Tax Act, while calculating the capital gain on foreign investment in shares, impact of foreign currency fluctuations should be considered in it. Meaning thereby in your case, Capital Gain Tax will be calculated as follows:
Sales Consideration: 150*75= 11,250
Cost of Acquisition (COA): 100*70= 7000
Short Term Capital Gain= Rs. 4,250
* It will be considered as short term capital gain as shares were sold with is a period of 3 months which are less than the period ( i.e 24 months)required to qualify as long term capital gain.
Tax Rate on Short Term Capital Gain is 30% i.e (Rs. 4250*30%= Rs.1,275)
Also, as per the Tax Avoidance Treaty between US and India, tax is paid in US on this capital gain can be claimed as credit in India while filing the Income Tax Return.
Thanks and Regards
Divya Chugh
Dear Sir,
Hope you are doing well !!
You will be liable to pay capital gain tax on Rs. (150*75 - 100*70).
Also note that in a case of double taxation of income where the same income is getting taxed in India as well as abroad, one may resort to the Double Taxation Avoidance Agreement (DTAA) that India would have entered into with the other country in order to eliminate the possibility of paying taxes twice.
We may assist you in entire procedure.
A follow up, Purchase at $100 (@70 USD-INR exchange rate) and sold at $150 (@75 USD-INR exchange rate). So the taxable amount would be including currency fluctuation (150*75 - 100*70). But if sold amount 150*75 was not transferred back to India for another 3 months. Will there be any tax implication if say USD-INR exchange rate become 77 at the time transfer back to India?
No exchange rate at the time of sale needs to be seen.
Hello sir
in my point of view it would be 150*75 less 100*70.
the difference will be consider as the foreign exchange. It will be taxed in India if u r resident of India.
but as the gain will be of foreign exchange then tax need to be paid in USA as well.
As per DTAA agreement b/w USA & India u can claim the tax paid in USA as deduction form the tax amount that will be paid in India.
if u need assistance in filling ur ITR then u can contact me through phone consultation
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Dear Vineet,
Change in exchange rate at the time of transferring money to India will not impact the capital gain. It means that the exchange rate on the date of sale of stocks will be considered for calculating the sales consideration and the capital gain.
Thanks and Regards
Divya Chugh
No, there will be no tax implication on the same.
No tax implication if difference arises due to repatriation of proceeds.
There won't be any tax implication for change in the exchange rate at the time of the repatriation of proceeds.
Hi
My apologies for the previous answer. In your case, Rule 115 shall apply. The Rule says,
The rate of exchange for the calculation of the value in rupees of any income accruing or arising or deemed to accrue or arise to the assessee in foreign currency or received or deemed to be received by him or on his behalf in foreign currency shall be the telegraphic transfer buying rate of such currency as on the specified date.
Specified Date means, in respect of income chargeable under the head "Capital gains", the last day of the month immediately preceding the month in which the capital asset is transferred.
Thus, you need to first calculate capital gains in the foreign currency. Such gain shall then be converted into INR by using TTBR of last day of the month immediately preceding the month in which the shares are sold.
There is no relevance of rate of transfer of funds to India.