As when I bought the shares while I was in US only, USD / INR was around Rs 60 and now it is more than Rs 80. Now I am resident of India for Tax purpose. How the Capital Gain amount will be calculated for tax purpose?

Ans: As per CBDT (Central Board of Direct Taxes) notification on Foreign tax credit (FTC), if you have paid excess tax on income arising from foreign country, such excess shall not be considered.

FTC shall be lower of either Tax payable under provisions of tax treaty Or Foreign tax paid on such income.

Ans: I understand you are resident and ordinary resident for the Income Tax purpose. Accordingly, when you sell shares (US equity market), it will be taxable as Capital Gain (assuming trading in shares is not main source of income).

If shares are sold after holding it for more than 24 months it will be taxable at 20% (plus applicable surcharge and cess).

Ans: Tax on gain arises on transfer of capital asset being shares is taxable in the year in which shares are transferred.

Capital gain tax can be saved by investing consideration in acquiring house property provided you don't have more than 1 house property on the date of transfer.

Ans: Capital gains is only applicable once you sell those shares. Further, you will also get the benefit of indexation on the cost and your 10 lakhs will be adjusted and become approx. 17 lakhs. The difference of 13 lakhs will be subjected to capital gains tax @ 10%. However, you can either invest in bonds / immovable property (assuming you own only one property) and save this tax.

Ans: When you sell shares and make a profit, the tax implications depend on the holding period and the type of capital gain—long-term or short-term. Here's how the tax will be calculated based on your Rs 40,000 profit:

1. Determine the Holding Period:
Short-Term Capital Gains (STCG): If the shares were held for less than 12 months before selling, the profit is considered short-term.
Long-Term Capital Gains (LTCG): If the shares were held for more than 12 months, the profit is considered long-term.
2. Tax on Short-Term Capital Gains (STCG):
Tax Rate: STCG on the sale of shares is taxed at 20% plus applicable surcharge and cess.

Your Situation: If your Rs 40,000 profit is short-term, it will be taxed at 20%.

Example Calculation:

Tax on STCG = 20% of Rs 40,000 = Rs 8,000
Add surcharge and cess as applicable to arrive at the final tax payable.
3. Tax on Long-Term Capital Gains (LTCG):
Exemption Limit: The first Rs 1.25 lakh of LTCG in a financial year is tax-free.

New Rule (12.5% on gains above Rs 1.25 lakh): If your total LTCG exceeds Rs 1.25 lakh, the amount above Rs 1.25 lakh will be taxed at 12.5%.

Your Situation:

If your Rs 40,000 profit is long-term and your total LTCG for the year is within Rs 1.25 lakh, no tax will be due on this profit.
If your total LTCG exceeds Rs 1.25 lakh, then the amount above Rs 1.25 lakh will be taxed at 12.5%.
4. Filing Tax Returns:
Include the Gains: You need to declare these capital gains when filing your income tax return.
Pay the Tax: Ensure that you pay any applicable tax before filing your return to avoid penalties.
Final Insights:
Whether your Rs 40,000 profit is short-term or long-term, understanding the holding period and applying the correct tax rate is essential. If your gains fall under LTCG and your total gains for the year exceed Rs 1.25 lakh, be prepared to pay the 12.5% tax on the excess amount.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in