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

A non-resident, Mr. Smith, bought shares of an Indian company using US dollars and sold them in the tax year. Under Rule 52 of the Income-tax Rules, 2026, which rate is used to convert the capital gains computed in the foreign currency initially utilised in the purchase back into rupees?

The capital gains are reconverted at the telegraphic transfer buying rate of the currency initially used for purchase, as on the date of transfer of the asset. The average of buying and selling rates is used only for converting cost, transfer expenses and sale consideration.

  1. AThe telegraphic transfer buying rate of such currency on the date of transfer of the assetCorrect
  2. BThe average of the telegraphic transfer buying and selling rates on the date of transfer
  3. CThe telegraphic transfer selling rate on the date of acquisition
  4. DThe average of the telegraphic transfer buying and selling rates on the date of acquisition

Explanation

Under Rule 52(1) Sl. No. 4, the computed foreign-currency capital gains are converted into rupees at the telegraphic transfer buying rate of that currency on the date of transfer. The average rate applies to cost, expenses and sale consideration, not to the final reconversion of gains.

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