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

Zeta Inc., a non-resident, bought shares of an Indian company using US dollars and sold them in the current year. Under Rule 52 of the Income-tax Rules, 2026, which exchange rate converts the full value of consideration received on transfer into the foreign currency initially used for the purchase?

The full value of consideration is converted using the average of the telegraphic transfer buying and selling rates of the foreign currency initially used for purchase, as on the date of transfer. TT buying rate on transfer date is used only for converting the final gain into rupees.

  1. AAverage of TT buying and TT selling rates on the date of transferCorrect
  2. BTT buying rate on the date of transfer
  3. CAverage of TT buying and TT selling rates on the date of acquisition
  4. DTT selling rate on the date of acquisition

Explanation

Sl. No. 3 of the Rule 52 table prescribes the average of TT buying and selling rates of the foreign currency initially used for purchase, as on the date of transfer, for the full value of consideration. The TT buying rate on transfer date is used only to convert final computed gains into rupees (Sl. No. 4). The acquisition-date average applies to cost.

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