Capital Gains
Capital Gains on Securities for NRIs – Taxation & Compliance Guide by Casela Advisors
At Casela Advisors, your trusted Chartered Accountant for NRI taxation, we specialize in offering comprehensive guidance on the taxation of Capital Gains (CG) arising from the sale of securities and other capital assets in India by Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs).
What Are Capital Gains for NRIs?
Any profit or loss from the transfer (sale, exchange, or relinquishment) of a capital asset is classified as a Capital Gain (CG). Under the Indian Income Tax Act, capital gains are taxed under the head “Income from Capital Gains” in the year of transfer, subject to certain exemptions.
‘Capital Assets’ include:
- Equity Shares
- Mutual Fund Units
- Bonds and Debentures
- Gold, ETFs, and Other Marketable Securities
A. Classification of Capital Assets
The taxability of CG depends on the holding period of the asset, determining whether it is a Short-Term Capital Asset (STCA) or Long-Term Capital Asset (LTCA). The following classification applies to both residents and NRIs:
| Asset Type | Holding Period (Before July 23, 2024) | Holding Period (On/After July 23, 2024) |
|---|---|---|
| Listed Shares, Equity MFs, Bonds, Debentures | >12 months | >12 months |
| Business Trust Units (on recognized exchanges) | >36 months | >12 months |
| Unlisted Shares | >24 months | >24 months |
| Other Capital Assets (Gold ETFs, etc.) | >36 months | >24 months |
| Unlisted Bonds/Debentures | >36 months | Deemed STCG |
Note: Unlisted Bonds and Debentures are deemed short-term regardless of holding period and taxed as per applicable income tax slab rates.
B. Capital Gain Categories
- Long-Term Capital Gain (LTCG): From sale of LTCA
- Short-Term Capital Gain (STCG): From sale of STCA
C. NRI Capital Gains Tax Rates on Securities
| Capital Asset | Before July 23, 2024 | On/After July 23, 2024 |
|---|---|---|
| Listed Equity Shares, Equity MFs (STT paid) | STCG @ 15% | STCG @ 20% |
| Other Assets (STCG) | As per income slab | As per income slab |
| Listed Equity Shares (LTCG) | 10% (without indexation) | 12.5% (without indexation) |
| Unlisted Shares (LTCG) | 10% | 12.5% |
| Listed Bonds, Debentures (LTCG) | 10% | 12.5% |
| Gold, ETFs, Other Assets (LTCG) | 20% (with indexation) | 12.5% (without indexation) |
| Specified Mutual Funds / MLDs | Deemed STCG | Deemed STCG |
Note: LTCG is taxable only if the total exceeds ₹1.25 lakhs. Surcharge and cess apply additionally.
D. Capital Gains Computation for NRIs
Computation Formula:
Capital Gains = Sale Consideration – Transfer Expenses – Indexed Cost (if eligible)
- Indexation adjusts asset value for inflation (not available post-July 23, 2024).
- Foreign Exchange Benefits apply if investments were made in foreign currency in specified assets.
E. Key Capital Gains Provisions for NRIs
1. Fair Market Value (FMV) Substitution
For unlisted shares, if sale value < FMV (as per Rule 11UA), FMV will be deemed the sale price.
2. Gift & Inheritance of Capital Assets
- No tax on gifting/inheriting assets between relatives.
- On sale, cost and holding period of previous owner are inherited by the recipient.
3. Set-off & Carry Forward of Capital Loss
- LTCL: Can only be set off against LTCG.
- STCL: Can be set off against both STCG & LTCG.
- Carry forward for up to 8 years, provided return is filed on time.
4. Income Tax Return Filing & TDS Refund
NRIs must file an ITR to:
- Claim excess TDS refund deducted on capital gains.
- Set off or carry forward capital losses.
5. DTAA Benefits for NRIs
Under the Double Taxation Avoidance Agreement (DTAA), NRIs may claim:
- Lower tax rates or exemptions.
- Credit for taxes paid in India or abroad.
Consult Casela Advisors for guidance on applicable DTAA provisions with your country of residence.
6. Basic Exemption Limit Adjustment
Only applicable on STCG taxable at slab rates (not on STCG @15% or LTCG).
7. Chapter VI-A Deductions
Deductions (like LIC, Mediclaim, PPF) apply only to STCG taxed at slab rates, not to 15% STCG or LTCG.
8. Reinvestment Exemption (Section 54F)
NRIs can claim exemption on LTCG by reinvesting in residential property in India, subject to conditions. For full eligibility, refer to our Capital Gains Exemption Services.
📌 Why Choose Casela Advisors?
As a specialized Chartered Accountant for NRI Capital Gains, Casela Advisors ensures:
- Accurate computation of gains.
- Optimal tax planning under DTAA and Indian tax law.
- Claim of refunds, exemptions, and loss adjustments.
- End-to-end compliance and advisory.
🌍 Popular NRI Capital Gains Services:
- Tax Planning on Equity & Mutual Funds
- Sale of Inherited Property or Assets
- Filing ITR for TDS Refund
- Claiming Grandfathering Exemption on LTCG
- DTAA Tax Treaty Consultation
- Capital Gains Advisory for Gold, ETFs & Bonds
📞 Book a Consultation
Contact Casela Advisors – your trusted partner for NRI Capital Gains Tax filing, advisory, and compliance.
