Friday October 5, 02:08 AM
Leeway for foreign cos in capital gains...
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By Economy Bureau
In a landmark judgement on computation of capital gains tax, the Authority for Advanced Ruling (AAR) has said foreign companies are entitled to a lower tax rate of 10% on capital gains, made on any asset bought in foreign currency. Simply put, this would mean that foreign companies selling assets in India can avail of a concessional capital gains tax rate of 10%, instead of paying long-term capital gains at 20% even when they opt for a foreign currency fluctuation benefit. This comes after the AAR in the case of Timken SAS of France ruled that on the long-term capital gain, arising from the sale of original and bonus shares of the Indian company, the applicant, which is a foreign company is entitled to the benefit of the first proviso to section 112(1) and, therefore, the quantum of tax payable shall not exceed 10% of the amount of capital gain." Timken SAS sold its shares, including bonus shares in a listed company in India- NRB and had appealed to the AAR on the rate of capital gains tax. While the ruling is applicable only to Timken, it will come in handy in its advisory nature in other cases.
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