The Finance Bill 2025 proposes a change to the tax rate for long-term capital gain (LTCG) arising from the transfer of securities by Foreign Institutional Investors (FIIs). Under the current provisions, long-term capital gains from these securities, not covered under Section 112A, are taxed at a rate of 10%. The proposed amendment increases this rate to 12.5% for all such securities, excluding those provided in foreign exchanges as specified under Section 115AB. Additionally, the Rs 1.25 lakh exemption applies only to gains from assets covered under Section 112A, where Securities Transaction Tax (STT) is involved. For the period from July 23, 2024, to March 31, 2025, the tax rate on long-term capital gains for FIIs not covered by Section 112A will remain at 10%.
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- FAQs : Parity in rates of long-term capital gain on transfer of securities by non-resident – Budget 2025
- Q.1 What is the current tax rate for income by way of long-term capital gains arising from transfer of securities (other than units referred to in section 115AB) and not covered under section 112A by Foreign Institutional Investors (FIIs) [Reference: Section 115AD of Income-tax Act, 1961]?
- Q.2 What is the change to the tax rate for these long-term capital gains brought in by the amendment by the Finance Bill, 2025?
- Q.3 Does the benefit of exemption of Rs 1.25 Lakh apply for all long-term capital gains for FIIs as mentioned in 2nd proviso to 115AD (iii)?
- Q.4 What is the tax rate for income on long term capital gains for the transactions mention in 115AD (iii) which are not covered under section 112A for the period 23.07.2024 to 31.03.2025?
FAQs : Parity in rates of long-term capital gain on transfer of securities by non-resident – Budget 2025
Q.1 What is the current tax rate for income by way of long-term capital gains arising from transfer of securities (other than units referred to in section 115AB) and not covered under section 112A by Foreign Institutional Investors (FIIs) [Reference: Section 115AD of Income-tax Act, 1961]?
Ans. The tax rate for income by way of long-term capital gains on transfer of securities (other than units referred to in section 115AB) by the FIIs that are not covered u/s 112A is 10%.
Q.2 What is the change to the tax rate for these long-term capital gains brought in by the amendment by the Finance Bill, 2025?
Ans. The tax rate for income by way of long-term capital gains arising from the transfer of the aforementioned securities by FIIs is now proposed to be 12.5%. With this amendment, long term capital gains for all securities except for those referred in Section 115AB (i.e. which have been provided in Foreign Exchanges) shall be taxed at 12.5%.
Q.3 Does the benefit of exemption of Rs 1.25 Lakh apply for all long-term capital gains for FIIs as mentioned in 2nd proviso to 115AD (iii)?
Ans. The benefit of Rs 1.25 Lakhs is provided only for the capital gains from the transfer of long-term capital asset referred to in section 112A of the Income Tax Act [i.e. where payment of STT is involved (Ref. 112A(1) of the Income-tax Act, 1961].
Q.4 What is the tax rate for income on long term capital gains for the transactions mention in 115AD (iii) which are not covered under section 112A for the period 23.07.2024 to 31.03.2025?
Ans. The tax rate for income by way of the aforementioned long-term capital that are not under section 112A, for the period of 23.07.2024 to 31.03.2025, shall remain 10%.
