TAXATION OF GAINS FROM INDIAN SHARES VIS-À-VIS FOREIGN SHARES

 METHODOLOGY FOR CLASSIFICATION

The gains from the transfer of Indian Shares are taxed in India based on their Period of Holding. If the period of holding of shares (listed) is less than 12 months, they are classified as short-term capital assets. If the period of holding exceeds 12 months, these are classified as long-term capital assets.

The period of holding for unlisted Indian shares is 24 months whereas the holding period for listed Indian shares is 12 months as stated above.

The methodology for classifying foreign shares (listed or unlisted) is as same as the Indian unlisted shares. So, if the period of holding of shares is less than 24 months, they are classified as Short-term capital assets. If the period of holding is more than 24 months, these are classified as long-term capital assets.

 

TAX RATE

Gains from the transfer of Long-term capital assets of India shares(listed) are taxable @ 10% (indexation benefit is not available). Further, Long-term capital gain is exempt up to One Lakh Rupees in a financial year. Short-term capital gains from the transfer of India shares(listed) are taxed @ 15%. Unlike long-term capital gains, short-term capital gains have no exemption limit.

Gains from the transfer of Long-term capital of India shares(unlisted) are taxed @ 20% (with indexation). Short-term capital gains from the transfer of India shares(unlisted) are taxed at a slab rate applicable to the assessee based on his Total Income.

Long-term capital gains from the transfer of foreign shares (listed or unlisted) are taxable @ 20% (Indexation benefit is available). Additionally, unlike for gains from the transfer of Indian Shares, there is no exemption cap for gains from foreign shares. Short-term capital gains from the transfer of foreign shares (listed or unlisted) are taxed at a slab rate applicable to the assessee based on his total income.

 

The significant tax distinctions between the Indian Shares and foreign shares are outlined in the table below.

 

Sl.No.	Particulars	Listed Indian Shares		Listed Foreign Shares
		STCG	LTCG	STCG	LTCG
1	Period of Holding	Up to 12 months	More than 12 months	Up to 24 months	More than 24 months
2	Tax Rate	15%	10%	Applicable slab rate	20%
3	Indexation for LTCG	NA	Not available	NA	Available
4	Exemption Limit	NIL	Up to Rs. 1 Lakhs	NIL	NIL

 

Sl.No.	Particulars	Unlisted Indian Shares		Unlisted Foreign Shares
		STCG	LTCG	STCG	LTCG
1	Period of Holding	Up to 24 months	More than 24 months	Up to 24 months	More than 24 months
2	Tax Rate	Applicable slab rate	20%	Applicable slab rate	20%
3	Indexation for LTCG	NA	Available	NA	Available
4	Exemption Limit	NIL	NIL	NIL	NIL

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CA Ramakrishna Sanjay