CA Final · Direct Tax Laws & International Taxation · Capital Gains
Hemant, a non-resident, transfers shares of an Indian company that he had bought with US dollars. For computing his capital gains under Rule 52 of the Income-tax Rules, 2026, which exchange rate is applied to convert the full value of consideration into the foreign currency initially used for the purchase?
The full value of consideration is converted at the average of the telegraphic transfer buying and selling rates of the original purchase currency on the date of transfer. The acquisition-date rate applies to cost, and the TT buying rate applies only to the final gain.
- AThe average of the telegraphic transfer buying and selling rates of that currency on the date of acquisition of the shares
- BThe average of the telegraphic transfer buying and selling rates of that currency on the date of transfer of the sharesCorrect
- CThe telegraphic transfer buying rate of that currency on the date of transfer of the shares
- DThe telegraphic transfer selling rate of that currency on the last day of the tax year
Explanation
Under Rule 52(1), the full value of consideration is converted at the average of the TT buying and TT selling rates of the currency initially used for the purchase, as on the date of transfer. The acquisition-date average applies only to the cost of acquisition. The TT buying rate on the transfer date is used only to convert the final computed gain into rupees.
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