Use three rate inputs for an eligible share sale
Section 72(6) of the Income-tax Act, 2025 requires an eligible non-resident to compute capital gains on Indian company shares or debentures in the foreign currency initially used to buy them, then reconvert the gain into rupees. Rule 52 of the Income-tax Rules, 2026 uses an acquisition-date average for acquisition cost, a transfer-date average for consideration and eligible transfer expense, and the transfer-date buying rate for the final reconversion.
Read the applicable text: Income-tax Act, 2025, sections 1, 67, 72, 76, 79, 197, 198 and 210 Notified Income-tax Rules, 2026, Rules 52 and 206.
Confirm scope before applying the worksheet
This guide concerns ordinary sales of qualifying Indian company shares held as capital assets in tax year 2026–27, beginning 1 April 2026. It does not apply the new Act to the AY 2026–27 return for FY 2025–26. Section 72(6) excludes equity shares referred to in section 198. For long-term gains of a foreign company or other non-resident on unlisted securities or shares of a company in which the public are not substantially interested, section 197(4) switches off section 72(6). Screen other special rules as well, including section 76 instruments and section 210(5), which excludes the section 72(6) method for the securities covered by the specified entries in the section 210 table. The illustrations assume qualifying short-term share sales with no deemed consideration adjustment and no other overriding provision. Treaty protection, tax rate, withholding and return reporting require separate checks.
Convert the transaction inputs in the right order
If the SBI rates are expressed as rupees per foreign currency unit, divide the eligible rupee cost by the acquisition-date mean of the TT buying and selling rates. Divide gross rupee consideration and the supported expense incurred wholly and exclusively in connection with transfer by the transfer-date mean. Subtract converted cost and expense from converted consideration; multiply the foreign currency gain by the transfer-date TT buying rate. Rule 52 defines the selling rate and refers to Rule 206 for the buying-rate definition; use the transaction dates in Rule 52 for this computation. Where the source quotes lots of foreign currency, normalise units before using the rates.
Keep the acquisition trail by lot
Use bank remittance, investment and settlement records to identify the currency initially used and match units to substantiated costs; apply the statutory FIFO rule where section 67(7) governs depository-held securities. Section 72(6)(b) extends the computation method to subsequent reinvestments and sales of qualifying securities. The fresh lot has its own cost and acquisition-date evidence. A broker settlement currency or accounting reporting currency does not establish the original purchase currency.
Document the rupee bridge
Keep gross proceeds separate from deductions in settlement. Section 72(3)(b) disallows securities transaction tax as a deduction. Preserve the acquisition and transfer dates, applicable SBI evidence, exact currency amounts and reconciliation to bank receipts. Use precision throughout the conversion and reconcile any final rounding at the relevant reporting stage. Where dates, rates or original currency cannot be supported, resolve those facts before sign-off.
Six worked illustrations
All facts and amounts are fictional. Calculations illustrate the stated assumptions, not a predetermined legal outcome.
Illustrative example 1: Three rates, one sale
Cost ₹8,00,000 at acquisition TT rates ₹79 and ₹81 converts to USD 10,000. Sale ₹10,56,000 and eligible fees ₹8,800 at transfer TT rates ₹87 and ₹89 convert to USD 12,000 and USD 100. The gain of USD 1,900 reconverts at ₹87 to ₹1,65,300.
Illustrative example 2: Rupee price rise versus currency gain
Cost ₹7,50,000 at an acquisition average ₹75 is USD 10,000. Sale ₹8,50,000 at a transfer average ₹85 is also USD 10,000. With no qualifying expense the gain under the method is nil despite a ₹1,00,000 rupee price increase.
Illustrative example 3: Wrong final reconversion rate
A substantiated gain of EUR 1,250 is reconverted using a transfer TT buying rate of ₹95. The answer is ₹1,18,750. A ₹96 average would give ₹1,20,000, overstating the result by ₹1,250.
Illustrative example 4: Gross settlement control
The gross sale price is ₹9,00,000. A settlement deduction of ₹18,000 reduces the bank receipt to ₹8,82,000. Of the deduction only ₹9,000 is an eligible transfer expense. Transfer average ₹90 gives USD 10,000 gross and USD 100 expense. With USD 8,500 supported acquisition cost and ₹89 buying rate, the gain is ₹1,24,600.
Illustrative example 5: Reinvestment lot
A supported reinvestment costs ₹7,20,000 at a purchase-date mean of ₹90 per EUR. The later sale produces ₹9,70,000 at a mean of ₹97; there is no eligible fee. EUR 10,000 less EUR 8,000 gives EUR 2,000. At the transfer buying rate of ₹96, the gain is ₹1,92,000.
Illustrative example 6: One sold lot, one retained lot
A sold lot cost ₹6,40,000 at ₹80 per USD; a retained lot cost ₹3,60,000. Gross proceeds for the sold lot are ₹8,10,000 at ₹90 per USD and there are no expenses. USD 9,000 less USD 8,000 gives USD 1,000, or ₹89,000 at the buying rate. The retained cost stays in the lot register.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Check the relevant tax year | Signed transfer timeline. |
| 2 | Confirm non-resident status | Applicable residence analysis. |
| 3 | Classify issuer and securities | Corporate and security records. |
| 4 | Screen exclusions and special computations | Section 198 and instrument-specific review. |
| 5 | Establish original purchase currency | Bank funding and investment evidence. |
| 6 | Match disposed units to acquisition lots | Custody ledger and acquisition records. |
| 7 | Capture both rate pairs and their dates | SBI TT evidence and quote units. |
| 8 | Verify gross consideration and eligible expense | Sale contract, section 79 review where relevant, and settlement bridge. |
| 9 | Perform and cross-check the conversions | Foreign currency and rupee schedules. |
| 10 | Reconcile tax gain and remaining holdings | Signed tax workpaper and cost roll-forward. |
Sixteen practitioner FAQs
1. Does an overseas bank account alone establish non-residence?
No. Determine residence under the applicable income-tax law.
2. Does the worksheet use the new Act for FY 2025–26?
No. That FY and its AY 2026–27 return are separate.
3. Does it apply to any shares sold by a non-resident?
No. Check issuer, capital asset status, section 198 and special provisions.
4. Which currency is relevant?
The foreign currency initially used to purchase the qualifying securities.
5. Which date applies to the cost rate?
The acquisition date of the particular asset or lot.
6. Which date applies to the expense rate?
The transfer date for qualifying expenditure.
7. Is the gain reconverted at the average?
No. Use the transfer-date TT buying rate.
8. May I take the actual bank conversion rate instead?
Rule 52 specifies the required rates. Keep actual conversion evidence for reconciliation.
9. Is accounting currency determinative?
No. It serves a different purpose.
10. Are net proceeds after all settlement deductions the starting point?
Use gross consideration and test deductions individually.
11. Can general custodian fees be treated as exit expenses?
Only include expenditure that satisfies the transfer connection test.
12. Do I blend rates for multiple acquisitions?
Preserve the relevant acquisition-date inputs by identified lot.
13. What happens to reinvestments?
The method can continue to apply; verify the fresh lot and dates.
14. Does a rupee gain guarantee a foreign currency gain?
No. The result can differ because rates are applied at different stages.
15. Does this worksheet determine the tax rate or withholding?
No. Determine those separately.
16. Can the illustration rates be reused?
No. They are hypothetical; retain evidence for the actual date and currency.
Official sources
Income-tax Act, 2025, sections 1, 67, 72, 76, 79, 197, 198 and 210 Notified Income-tax Rules, 2026, Rules 52 and 206