How capital gains on foreign shares are computed and taxed in India

I returned to India in 2023 after working in the US for over 15 years. During my stay in the US, I had acquired shares of several companies listed on the NYSE. I now want to book gains and reinvest the money into new shares. Since I will not be remitting the money back to India, are these capital gains to be computed at the rupee exchange rate at the time of purchase or at today’s exchange rate? If it is today’s exchange rate, are there any provisions to protect against rupee depreciation given that I had purchased the shares in USD long before?

*Name withheld on request*

Since you returned to India in 2023, I assume you will qualify as a Resident and Ordinarily Resident (ROR) in India for the tax year 2026–27. Further, although you may have acquired the shares during your stay in the US, since you propose to sell them in August 2026, the tax implications of such sale will be governed by the provisions of the Income Tax Act, 2025, which came into effect on 1 April 2026.

Notwithstanding the fact that you do not wish to repatriate the sale proceeds to India, the capital gains earned in foreign currency are still required to be computed in Indian rupee (INR). There is no separate tax relief or concession available in respect of the rupee depreciation that may have occurred between the time you made the investment and the time you propose to sell the shares. As per the prescribed mechanism, the capital gains must first be computed in the same foreign currency (i.e. USD) by taking into account the sale consideration, cost of acquisition, and transfer-related expenses in USD. The resultant capital gain should thereafter be converted into Indian rupees using the State Bank of India (SBI) Telegraphic Transfer (TT) buying rate prevailing on the last day of the month immediately preceding the month in which the shares are sold. In your case, the applicable exchange rate would be the SBI TT buying rate as on 31 July 2026 considering the proposed sale in August 2026.

As you have held the foreign-listed shares for more than 24 months, they would qualify as long-term capital assets. Accordingly, the resultant long-term capital gains would be taxable in India at 12.5%, plus the applicable surcharge and cess.

Further, since you held foreign shares during the calendar year 2026, you would also be required to disclose such foreign shares, along with the income arising therefrom, in Schedule FA of your income-tax return for the tax year 2026–27.

Additionally, under the foreign exchange regulations of India, retention of sale proceeds outside India is permitted since the shares were acquired by you while you were a resident of the US.

Harshal Bhuta, Partner, P. R. Bhuta CAs