In case of listed units that are debt oriented, the LTCG shall be taxed at 20%. difference between market price as on 31 January 2018 and purchase price shall be considered as exempt from tax). Also, in case the units were purchased before 31 January, 2018 then the benefit of grandfathering shall also be considered while calculating the capital gains (i.e. LTCG exceeding ₹1 lakh shall be taxed at 10% without any indexation of cost. In case of listed units that are equity-oriented, the Long Term Capital Gain (LTCG) shall be taxed under section 112A of the Act (provided Securities Transactions Tax is paid at the time of sale).

The taxpayer will have an option to choose the lower between tax rate of 20% with indexation and 10% without indexation. The capital gain is calculated as per sale price and cost of acquisition in INR. If shares are purchased in Indian currency, then there is no requirement of conversion/ reconversion of capital gain in foreign currency. Subject to compliance of the above, there may be a situation where foreign investor can purchase share of an Indian company in foreign currency.

Permissibility of purchasing Indian shares in foreign currency is governed by Foreign Exchange Management Act (FEMA), 1999, related rules/regulations and FDI guidelines. In this case, benefit of indexation of cost is not available, however, the applicable tax rate shall be 10% plus applicable surcharge and cess. If shares are purchased in foreign currency, capital gain is calculated in foreign currency and then converted into Indian currency.

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