LOWER CAP GAINS ON OFF-MARKET DEALS FOR FOREIGNERS

Foreign companies or individuals, including foreign institutional investors, having business or profession in India can enjoy lower capital gains tax on off-market deals if the stocks are purchased in foreign currency.According to a recent decision of the Mumbai bench of the Income Tax Appellate Tribunal, non-resident companies and individuals are entitled to a beneficial rate of tax of 10% on long-term capital gains arising from the sale of shares of listed entities. Earlier, non-resident assesses were taxed at the rate of 20%. Currently, off-market deals attract a capital gains tax of 20% with indexation benefit (where the gains is adjusted for inflation) and 10% without indexation benefit. While this was largely perceived to apply to residents, the tribunal has now spelt out that foreigners
are also entitled to the lower rate of tax. Further tribunal said that there should not be any discrimination between a foreign and an Indian entity in this regard.