Exemption of Long term Capital Gains arising to Non resident Indian on transfer of ‘ foreign exchange asset’ [Section 115F]

Where an assessee who is a Non Resident Indian, transfers any long term foreign exchange asset (here referred to as Original Asset), the whole of long term gains so made can be claimed exempt on satisfaction of the following condition: 

• That he has invested the whole or any part of the net consideration (Sale consideration less Cost of acquisition less Expenses on transfer)  in any of the Foreign Exchange Assets (here referred to as New Asset), namely: 

1. Shares of an Indian Company;

2.  Debentures issued by an Indian Company which is not a Private company;

3. Deposit with an Indian Public Limited company;

4. Central Govt. Securities;

5.  National Saving Certificates (NSC) VI &/or VII issue. 

6. Quantum of Deduction:

7. If the cost of the new asset is more than the net consideration in respect of the original asset, then the whole of such capital gains shall be exempt;

Else

• If the cost of the new asset is less than the net consideration in respect of the original asset, so much capital gains as bears to the whole of the capital gains the same proportion of as the cost of acquisition of the new asset bears to the net consideration, shall be exempt. Numerically expressed it comes to;      

  Long Term Capital Gains × Amount Invested

        Net Consideration       

Withdrawal of Exemption if:  

 If the new asset is transferred/ converted into money within a period of three years from the date of its acquisition, the exemption granted will be withdrawn and will be chargeable as capital gains in the year of transfer/ conversion of the new asset.

Option of not to avail exemption u/s Sec 115F:  

• An NRI can elect not to be governed by the provisions of Section 115F for any assessment year;

• In this case he/ she will have to submit a Self Assessment Return u/s 139 and declare that the provisions of this section shall not apply to him;

• The Total Income of the NRI shall be computed and tax on such total income shall be charged like other normal cases.