Queries you asked:
For shares sold through regular trading, is it required to declare long term 
capital gain on the  income tax forms even if tax is zero?
Sudarshana Agarwal

What is the buying & selling taxation charges for shares? Is there any 
TDS deductions applicable to NRI accounts.
Meenakshi Sundaram

What is capital gain tax for a NRI  whose brother  sold  ancestor home 
(purchased fifty years ago by father) and NRI got 1/4 share of sale price?
Rajendra Modi

Replies from Vinit Deo: 

Q. What types of assets fall under the definition of capital asset?

 

Capital Asset means property of every kind held by a person. However the following properties are specifically excluded from the definition of capital asset:

 

• Personal effects, for example; electronic items, apparel, furniture so on and so forth
• Agricultural land
• Some specified bonds viz. 6.5% Gold Bonds 1977, 7% Gold Bonds 1980
• National Defence Gold Bonds 1980, Special Bearer Bonds 1991, Gold Deposit Bonds 1999

 

Q. Are jewelry and precious stones included in the definition of capital asset?

 

Although jewelery is a personal effect, it is considered a capital asset for the purpose of computing capital gains.

 

Q. What are the examples of capital assets?

 

As we have said above, every property other than agricultural land, personal effects and specified bonds fall under the category of capital asset.

  

Q. What is meant by capital gains?

 

Capital Gain means the profit or loss arising from the transfer of a capital asset as mentioned above.

 

Q. What are the types of capital gains?

 

Capital gains are classified as long term and short term depending upon the duration for which the asset is held by the person. These are defined as follows:

 

Short-term capital asset: An asset, which is sold within a period of 36 months after its purchase is a short-term capital asset

 

Long-term capital asset: Any asset, which is sold after 36 months of its purchase, is a long-term capital asset. However, this criterion of holding period is relaxed to 12 months in case of the following assets:

• Equity and preference shares, debentures or any other financial instrument listed on a recognized stock exchange in India
•  Units of UTI or any other Mutual Fund
•  Zero coupon bonds

In other words, the above three types of asset will be considered as long term assets even if they are held for a period of more than 12 months.

 

Q. What are the rates of tax for long term and short-term capital gains?

 

	Rate of tax deduction at source (TDS)		Exemption available (only for long term capital gains)
Type of asset	Long term	Short term
A) Assets purchased in Indian currency
Equity share in companies (listed on stock exchange and Securities Transaction Tax is paid on the sale)	Nil	10.2% (11.22% if the Total income exceeds Rs 10 Lacs)	Non applicable (NA) as long term capital gain is exempt
Unit of equity oriented mutual fund	Nil	10.2% (11.22% if the Total income exceeds Rs 10 Lacs)	NA as long term capital gain is exempt
B) Specified assets purchased by remitting foreign currency to India Specified assets are: -Equity shares in Indian companies -Debentures and deposits in Indian public companies -Central Government securities	10.2% (11.22% if the total income exceeds Rs 10 Lacs)	30.6% (33.66% if the total income exceeds Rs 10 Lacs)	Capital gains  proportionate to the amount of net consideration which is reinvested in the specified assets in column 1.(See example 1 below)
C) Other Assets If the assets are not included in an of the special categories above e.g house property, land and building, jewelry, development rights etc.	20.4% (22.24% of the income exceeds Rs 10 Lacs)	30.6% (33.66% if the total income exceeds Rs 10 Lacs)	If the amount of capital gains is invested in bonds of National Highways Authority of India or Rural Electrification corporation, then the entire capital gains is exempt, else the proportionate gain is exempt. See Example 2 below

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Example 1: If the net consideration (i.e. sale value less expenses for the sale) from the sale of the asset is Rs 50,000 and the capital gains is Rs 20,000, then if NRI invests Rs 50,000 in a new specified asset, then entire capital gains of Rs 20,000 is exempt. If he invests Rs 40,000, then 80% (i.e. Rs 40,000 / Rs 50,000) of the capital gains is exempt and so on.

 

Example 2: If example 1 above, if the investment is made to the tune of Rs 20,000 then the entire capital gains will be exempt. If the investment is made of Rs 10,000, then only Rs 10,000 will be exempt.

 

Q. Is tax deductible on the capital gains payable to the Non Resident Indian (NRI)?

 

Yes. The NRI will receive the capital gains after deduction of tax as mentioned in the above table.

 

Q. Is it necessary to file income tax return in India?

 

If the only income of the NRI in India is the long term capital gains on specified asset as mentioned in category b in the table above or the investment income from such assets, then there is no need to file return of income in India. If the NRI also has some other income like rent, salary, professional income, income from non-specified assets so on and so forth, then he will have to file an income tax return by the 31^st July.

The author, Vinit Deo is a chartered accountant.

If you are an NRI and have a query on any personal finance issue, mail us at nri@moneycontrol.com