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

A specified fund (resultant fund) received shares of an Indian company in relocation from its original fund. It transfers those shares in the tax year and earns capital gains of ₹60,00,000, which would not have been chargeable to tax had the relocation not taken place. From the date of acquisition to the date of transfer, the aggregate of daily assets under management held by non-resident unit holders (not being permanent establishments in India) is ₹7,50,000 (in crore-days), and the aggregate of daily total assets under management is ₹10,00,000 (in the same units). The fund filed Form No. 178 within the due date. Under Rule 285 of the Income-tax Rules, 2026, what is the exempt income?

The exempt income is ₹45,00,000. Because Form No. 178 was filed, Rule 285 applies the formula A × B / C. That is ₹60,00,000 multiplied by the non-resident share of assets under management, ₹7,50,000 over ₹10,00,000, or 75 per cent.

  1. A₹15,00,000
  2. B₹45,00,000Correct
  3. C₹60,00,000
  4. DNil

Explanation

Rule 285(1)(a) gives exempt income as (A × B) / C, where A is ₹60,00,000, B is ₹7,50,000 and C is ₹10,00,000. The calculation is 60,00,000 × 0.75 = ₹45,00,000. ₹15,00,000 results from using the resident share (C – B) by mistake. Nil applies only if Form No. 178 is not filed, but here it was filed.

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