Long-term capital gain , private limited company

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A Friend (Querist)
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27 February 2013 Hello Experts.. My situation is somewhat typical.

I was living out of India till Dec 2004. No tax in India before that.

When I arrived to India in 2005 and brought my money from outside . I initially held FCNR( Foreign currency NOn resident) account which I broke and put money ( INR) in an NRO account.

Now I started living in India , doing a job and hence filed every years tax return as a resident Indian.

In 2008 , I bought some shares of a Private Limited company (It was a start up so Not listed) . Of course the money was what I brought from outside India but at the time I bought the shares I was resident Indian.

Since early 2011 I have again left India and came out so since early 2011 now I am again NRI.

Now the situation is that I am selling those shares of the private limited company. Since this is over 3 years of investment I think it will attract Long term capital gain. Question is How much?

Different forums are giving different answers. Some are saying that I can choose between 20 % after indexation or 10% without indexation but then other forum is saying that 10% without indexation is not applicable for Private Limited companies.

So does anyone know whether this is true (that 10% without indexation is not applicable for Private Limited companies) if yes does it matter if you are a resident or non resident ?

Then I also read somewhere that NRI can claim 10% without indexation if they have invested in "Specific Assets" which include "Shares of Indian Company". But my confusion is that When I invested I was resident but now I am NRI so what will be my position.

I know I have asked a lot of things and it might confuse you but if you are willing to help and want to get any clarification from me, please shoot....

Thanks in Advance.

A Friend

CA Suraj Lakhotia

CA Suraj Lakhotia (Expert)
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27 February 2013 The query you have put is quite long/ I have made an attempt to make the answer simple.

Long Term Capital Gains -

1. For NRI - For unlisted securities @ 10% without indexation. (Section 112(1)(c)(iii)

2. For All Assessees - 10% without indexation (only for listed securities) or 20% with indexation. [Proviso to Section 112(1)

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A Friend (Querist)
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28 February 2013 Thank you Mr Lakhotia

1) When I had purchased the shares in 2008 I was resident Indian. Now When I am selling I am an NRI so for this transactions Tax , I would be considered Resident Indian or NRI

2) Assuming that I am considered NRI as per the point above, Will the section 112(1)(c)(iii) be applicable only if the person bought the shares using foreign currency or it is also applicable if he/she bought the shares using INR from his Indian accounts?

Thanks again for your help.

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CA Suraj Lakhotia

CA Suraj Lakhotia (Expert)
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01 March 2013 1) Your status for assessment will be as on date.

2) There is no mention in Section 112(1)(c)(iii) that shares should be bought in Foreign Currency.

Still to avoid any complications in this matter, you might take advise of a professional practicing CA/expert..

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A Friend (Querist)
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13 March 2013 Yes Sir I have sought professional CA and his answers are exactly matching yours.

Thanks a Ton

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A Friend (Querist)
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08 April 2013 Hello once again Experts....

So as mentioned in the above information, I sold the shares of a private unlisted company.
The share purchase agreement was signed in March 2013 but I received the money in April 2013. The buyers have deducted the TDS which is more than what I am supposed to pay to Govt. Now my question is should I file the tax return for this transaction for FY 2012-13 because the Share purchase agreement was signed in March 2013 or I file the return in FY 2013-14 because I received the money in April 2013. Please advise.

Thx
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CA Suraj Lakhotia

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09 April 2013 Once you have signed the Share Purchase Agreement, the transaction would be complete.

A key point to note is the Financial Year in which tax has been deduction. If Tax was deducted for FY 2012-13, it would be better to file return for the same year.