CMA Intermediate · Direct and Indirect Taxation · Capital Gains
Under the Income-tax Act, 2025, an overseas financial organisation (Offshore Fund) earns long-term capital gains from transferring units purchased in foreign currency. At what rate is tax payable on these gains under the special provision for such funds?
Long-term capital gains of an Offshore Fund from transferring units bought in foreign currency are taxed at 12.5% under section 208. The 10% rate is for income received on those units, and rates in force apply only to the residual total income.
- A10%
- B12.5%Correct
- C20%
- DRates in force
Explanation
Section 208 provides that long-term capital gains arising from transfer of units purchased in foreign currency are taxed at 12.5%. The 10% rate applies to income received in respect of such units (dividend-type income), not to the capital gains. Rates in force apply only to the remaining income.
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