According to tax expert Harshal Bhuta from P. R. Bhuta CAs, when selling foreign shares acquired during overseas residency, capital gains must be computed in Indian rupees (INR) using the State Bank of India (SBI) Telegraphic Transfer (TT) buying rate prevailing on the last day of the month immediately preceding the sale month. For shares sold in August 2026, the applicable exchange rate would be the SBI TT buying rate as on 31 July 2026. Under the prescribed computation method, the capital gain should first be determined in the foreign currency in which the transaction took place, such as US dollars, by calculating the difference between the sale proceeds and the cost of acquisition after accounting for any transfer-related expenses. The Indian tax law does not provide any special exemption or relief for losses or gains arising solely due to depreciation of the Indian rupee against the foreign currency during the investment period.
As reported by Mint, since the foreign-listed shares have been held for more than 24 months, they qualify as long-term capital assets under Indian tax law. The resultant long-term capital gains are taxable at 12.5% plus applicable surcharge and cess. Even if the taxpayer chooses not to bring the sale proceeds back to India, the capital gains remain taxable in India and must be calculated in Indian rupees. The tax implications are governed by the Income Tax Act, 2025, which came into effect on 1 April 2026. Under the latest regulations, long-term capital gains are taxed at 12.5% flat without indexation for NRIs, with no grandfather benefit available.
According to the tax expert, since the individual held foreign shares during calendar year 2026, disclosure is mandatory in Schedule FA of the income-tax return for the tax year 2026–27. Taxpayers who qualify as residents under India's income tax laws are required to disclose their foreign income and overseas assets while filing their Income Tax Returns (ITR). Details of foreign assets must be reported in Schedule FA, while income earned from foreign sources is required to be disclosed in Schedule FSI. Failure to furnish the required information can result in a penalty of up to ₹10 lakh under the applicable provisions of the tax law. The Income Tax Department has observed that a section of taxpayers, particularly those with relatively small foreign holdings—such as former students who studied overseas and employees holding ESOPs of foreign companies—have not fully complied with the reporting requirements relating to foreign assets.
To encourage voluntary compliance, the Central Board of Direct Taxes (CBDT) has introduced a one-time compliance window, allowing eligible taxpayers to declare previously undisclosed foreign income and assets. Taxpayers opting for the scheme will be required to pay any applicable taxes, interest and prescribed fees. The government has also provided relief for taxpayers with relatively small foreign movable assets. Non-disclosure of such assets with an aggregate value of up to ₹20 lakh will not attract any penalty. Additionally, with effect from 1 October 2026, eligible taxpayers covered under this relaxation will also receive immunity from prosecution for such non-disclosures.
