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CA Final · Direct Tax Laws & International Taxation · Capital Gains

A non-resident, Mr. Dsouza, bought shares of an Indian company for ₹8,30,000 using US dollars, when the SBI TT buying rate was ₹82 and the TT selling rate was ₹84 per USD. He transferred the shares for ₹12,60,000 and incurred transfer expenses of ₹8,400. On the date of transfer the TT buying rate was ₹83 and the TT selling rate was ₹85 per USD. Applying Rule 52 of the Income-tax Rules, 2026, what is the capital gain in rupees?

The capital gain is ₹4,06,700. Cost converts to USD 10,000 at the acquisition-date average rate of 83. Sale value and expenses convert at the transfer-date average of 84, giving USD 15,000 and USD 100. The gain of USD 4,900 is reconverted at the TT buying rate of ₹83.

  1. A₹4,06,700Correct
  2. B₹4,11,600
  3. C₹4,21,600
  4. D₹4,05,000

Explanation

Cost: ₹8,30,000 / 83 (average of 82 and 84 on acquisition) = USD 10,000. Consideration and expenses are converted at the average on the transfer date, (83+85)/2 = 84: ₹12,60,000/84 = USD 15,000 and ₹8,400/84 = USD 100. Gain = 15,000 – 10,000 – 100 = USD 4,900. This is reconverted at the TT buying rate on the transfer date, ₹83, giving ₹4,06,700. Using ₹84 for reconversion gives ₹4,11,600, which is wrong.

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