CA Final · Direct Tax Laws & International Taxation · Capital Gains
Zenith Opportunities Fund, a specified fund, is a resultant fund that received shares of an Indian company on relocation from its original fund. It sold the shares for a gain of ₹12,00,000, which would not have been chargeable had the relocation not occurred. The holding period was 100 days. For the first 40 days, daily total assets under management (AUM) were ₹100 crore, of which non-resident holders held ₹60 crore. For the next 60 days, daily total AUM were ₹200 crore, of which non-resident holders held ₹100 crore. Form No. 178 was filed as required. Under Rule 285 of the Income-tax Rules, 2026, what is the exempt income under Schedule VI?
The exempt income is ₹6,30,000. Rule 285 multiplies the capital gains by aggregate daily AUM held by non-residents over aggregate daily total AUM. That is 8,400 over 16,000, or 0.525, applied to ₹12,00,000. Averaging the two period percentages would be incorrect.
- A₹6,30,000Correct
- B₹6,60,000
- C₹7,20,000
- DNil
Explanation
Exempt income = A × B / C. B = (40 × 60) + (60 × 100) = 8,400 and C = (40 × 100) + (60 × 200) = 16,000, in crore-days. The ratio is 0.525, so the exempt income is 12,00,000 × 0.525 = ₹6,30,000. The simple average of the two period ratios (0.6 and 0.5) gives ₹6,60,000, which is wrong because the rule aggregates daily AUM rather than averaging ratios.
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