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CMA Intermediate · Direct and Indirect Taxation · Basic Concepts, Basis of Charge and Capital and Revenue Receipts

Under section 209, a non-resident has long-term capital gains of ₹10,00,000 on transfer of notified bonds purchased in foreign currency, and other income of ₹3,00,000 taxable at rates in force. Which is correct?

The gains are taxed at 12.5% and section 72(6) does not apply. Section 209(1) sets 12.5% for long-term capital gains on the specified bonds or GDRs, and section 209(3) excludes section 72(6) from their computation. Other income is taxed at rates in force.

  1. AGains taxed at 10%, and section 72(6) applies in computing them
  2. BGains taxed at 12.5%, and section 72(6) does not apply in computing themCorrect
  3. CGains taxed at 12.5%, and section 72(6) applies in computing them
  4. DGains taxed at rates in force along with the other income

Explanation

Section 209(1) Table Sl. No. 3 fixes 12.5% for long-term capital gains on such bonds, so tax is ₹1,25,000 on the gains. Section 209(3) states that section 72(6) shall not apply to computing these gains. The ₹3,00,000 is taxed at rates in force separately, so the gains are not merged with it.

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