Extract of Rules 51 and 52 of the Draft Income-tax Rules, 2026 lays down specific compliance conditions relating to fund restructuring and capital gains computation. Rule 51 provides that for the purposes of Section 70(2) [Table: Sl. No. 5, Column C(a)(A)(iv)], where a capital asset is transferred from an original fund to a resultant fund being a Category III Alternative Investment Fund, the original fund must satisfy the condition that aggregate participation or investment by persons resident in India, whether direct or indirect, does not exceed five per cent of the corpus of the fund at the time of transfer. The expressions “original fund” and “resultant fund” carry the meanings assigned under Section 70(2). Rule 52 prescribes the rate of exchange mechanism for computing capital gains under Section 72 in the case of non-residents transferring shares or debentures of an Indian company. It mandates use of the average telegraphic transfer buying and selling rates for converting cost of acquisition, transfer expenses, and full value of consideration into foreign currency on relevant dates, and requires reconversion of computed capital gains into rupees at the telegraphic transfer buying rate as on the date of transfer. The telegraphic transfer buying and selling rates are defined with reference to Rule 206 and the rates adopted by the State Bank of India.
Extract of Rule No. 51 and 52 of Draft Income-tax Rules, 2026
Rule 51
Other conditions required to be fulfilled by the original fund.
(1) For the purpose of section 70(2) [Table: Sl no.5, Column C(a)(A)(iv)], the original fund, in a case where a capital asset is transferred to a resultant fund being a Category III Alternative Investment Fund, shall fulfil the condition that the aggregate participation or investment in the original fund, either directly or indirectly, by persons resident in India does not exceed five per cent of the corpus of such fund at the time of such transfer.
(2) For the purpose of sub-rule (1) the expressions “original fund” and “resultant fund” shall have the meanings respectively assigned to them in section 70(2) [Table: Sl no.5, Column C(a) and (c)].
Rule 52
Rate of exchange for conversion of rupees into foreign currency and reconversion of foreign currency into rupees for the purpose of computation of capital gains under Section 72 of the Act.
(1) For the purpose of computing capital gains arising from the transfer of a capital asset being shares in, or debentures of, an Indian company, in the case of an assessee who is a nonresident, the rate of exchange shall be as per column C thereof in the circumstances referred to in column B in the table given below:—
TABLE
| S.No | Circumstances | Rate of Exchange |
| A | B | C |
| (a) | for converting the cost of acquisition of the capital asset | the average of the telegraphic transfer buying rate and telegraphic transfer selling rate of the foreign currency initially utilised in the purchase of the said asset, as on the date of its acquisition; |
| (b) | for converting the expenditure incurred wholly and exclusively in connection with the transfer of the capital asset referred to in Sl.No (a), | the average of the telegraphic transfer buying rate and telegraphic transfer selling rate of the foreign currency initially utilised in the purchase of the said asset, as on the date of transfer of the capital asset; |
| (c) | for converting the full value of consideration received or accruing as a result of the transfer of the capital asset referred to in Sl.No (a), | the average of the telegraphic transfer buying rate and telegraphic transfer selling rate of the foreign currency initially utilised in the purchase of the said asset, as on the date of transfer of the capital asset; |
| (d) | for converting the capital gains computed in the foreign currency initially utilised in the purchase of the capital asset into rupees, | the telegraphic transfer buying rate of such currency, as on the date of transfer of the capital asset. |
(2) For the purposes of this rule-
(a) “telegraphic transfer buying rate” shall have the same meaning as defined in rule 206.
(b) “telegraphic transfer selling rate”, in relation to a foreign currency, means the rate of exchange adopted by the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), for selling such currency where such currency is made available by that bank through telegraphic transfer.
