Calculation of Capital Gains Tax on Foreign stocks

In http://kaipathoughts.blogspot.com/2013/02/rsu-stock-options-and-spp-taxation.html I exlpored the taxation for RSUs and other stock benefits given by employees. For Indian stocks most of the calculattions are simple. but many of us work for MNCs where stocks are valued on foreign currency and traded in foreign exchanges. The tax treatment of these gains will be like those shares for which STT is not paid. But the value of transactions calculation is not straight forward.

The calculation of gain needs to be computed in the foreign currency before convering to INR. The gains thus computed needs to be converted to INR based on the exchange rate published by SBI/RBI on the last day of the preceding month of the sale transaction. For e.g., if the purchase price of stock is $10000 and sale price is $12000, the capital gain is $2000 and say the sahres were sold in January 2013.. This $2000 needs to be converted to INR based on the exchange rate published for last day of December 2012. Note that this may result in different income from the actual income. Following table captures the situation where the actual income is different from the taxable income due to currency fluctuations.

 

No of Shares	Sell Date	Cost per share in USD	Exchange  Rate	Sell Date	Cost per share in USD	Exchange Rate on Last day of preceding month	Exchange  Rate	Taxable gain	Actual gain	gain type
10	05-Jan-11	10	50	05-Mar-11	12	55	60	1100	2200	ST
10	05-Jan-11	10	50	05-Mar-12	12	55	60	1100	2200	LT
10	05-Jan-11	10	50	05-Mar-11	12	45	40	900	-200	ST
10	05-Jan-11	10	50	05-Mar-12	12	45	40	900	-200	LT