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

Mr. Arvind Menon, a non-resident, bought shares of an Indian company using US dollars and later sold them. Under the Income-tax Rules, 2026 (Rule 52), which rate of exchange is used to convert the capital gains, already computed in US dollars, into rupees?

The capital gain computed in US dollars is converted into rupees at the telegraphic transfer buying rate of the dollar on the date of transfer of the shares. Averages of buying and selling rates apply only to cost, expenses and consideration, not to the final gain.

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

Explanation

Under Rule 52, the average of the TT buying and selling rates is used for converting cost, transfer expenses and sale consideration into the foreign currency. The final gain computed in that currency is converted into rupees at the TT buying rate on the date of transfer. The average-rate options relate to the earlier conversion steps, not the final one.

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