Stories
Can Indian Investors Claim the Rs 1.25 Lakh LTCG Tax Benefit on Global Stocks?
- •The Rs 1.25 lakh annual LTCG tax exemption is not available on foreign stocks simply because they are listed overseas or held long-term.
- •Long-term capital gains on overseas shares are taxable at 12.5 percent under Section 197 without the Rs 1.25 lakh threshold benefit.
- •Shares listed on foreign exchanges require a holding period of more than 24 months to qualify for long-term capital gains taxation.
- •Other assets excluded from the Rs 1.25 lakh threshold include real estate, physical gold and silver, and non-qualifying international mutual funds.
- •Investors must maintain thorough records of purchases, sales, brokerage statements, and foreign-currency conversions to support tax calculations.
Key Questions Answered
No, the Rs 1.25 lakh annual LTCG tax exemption threshold under Section 198 of the Income-tax Act, 2025, is not available on gains from foreign stocks merely because they are held for the long term or listed overseas. Long-term capital gains on overseas shares are taxable at a flat rate of 12.5 percent under Section 197 without the benefit of this threshold, plus applicable surcharge and cess.
Under Section 2(101), shares listed on foreign exchanges fall under a 24-month holding-period test. Gains on overseas shares held for 24 months or less are classified as short-term capital gains (STCG) and taxed at the investor's applicable income-tax slab rates. Shares held for more than 24 months qualify for long-term capital gains taxation at 12.5 percent without indexation.
The Rs 1.25 lakh threshold is not a universal exemption and excludes several categories such as real estate (land or buildings), physical gold and silver, debt-oriented mutual funds, and international mutual funds that invest in overseas equities without meeting equity-oriented fund definitions. Bonds, debentures, and any assets failing to satisfy Section 198 eligibility or STT conditions are also excluded.
