People earn profits by investing in companies listed in the stock market and also pay tax on the profits. But what happens in such a case when you buy and sell foreign shares? Many people invest in shares of foreign companies outside India. So if you also sell your shares of companies listed in the American market in India, then how will the tax be charged? Will you get the benefit of indexation and conversion in this?
Under which head of income tax will the tax be levied?
Generally, when an Indian investor trades in the Indian market, the profit he makes is considered as capital gain or loss. Which is divided into short-term and long-term. On this basis they pay tax.
In such a situation, if an Indian resident sells the shares of a foreign company, then it will be kept under long term capital only. Such shares should be held for 24 months or more. In case of foreign shares, apart from cess and surcharge, 20 percent tax will also have to be paid on long term capital gains.
For a period of less than 24 months?
If foreign shares are held only for 24 months or less then it will be considered short term. Tax on foreign shares will have to be paid at the rates of short term capital gains only. This will also include payment of surcharge and cess.
If you have earned any income from foreign investment, then in case of long term capital gain, if any exemption is available under Section 54F of the Income Tax Act, it will be calculated. The relief or benefit should be assessed separately to avoid double taxation. Whereas in case of foreign currency, the month preceding the month in which the shares are transferred will be considered for calculating tax.