Capital Gain Tax Computation - u/s 50AA can apply in Foreign Securities (US)

[PRIYAM KHAMBHATA]

Respected Sir

My client is Citizen of US but Ordinary Resident of India for the FY 2025-26, he has sold certain following foreign securities during the FY 2025-26,

ISHARES CORE TOTAL BOND ETF - IUSB

ISHARES RUSSELL 2000 GROWTH ETF - IWO

ISHARES RUSSELL 2000 VALUE ETF - IWN

VANGUARD SHORT TERM BOND - BSV

VANGUARD TOTAL BOND MARKET - BND

ISHARES RUSSELL 2000 GROWTH ETF - IWO

My query is that can the provision of section 50AA - Special Provision for computation of capital gain, affect on sold of above Foreign Securities. Please guide me.

Thanks

AI Summary

ETF Units Versus U.S. Bonds: Section 50AA Depends on the Legal Nature of the Asset Actually Transferred
Direct holdings in U.S.-listed ETFs, including BSV and BND, are described as outside the specified mutual fund framework under Section 50AA. Although these ETFs invest in bonds, the transferred asset is the ETF unit, not the underlying bonds, and the units are not thereby treated as market-linked debentures. Section 50AA therefore cannot be applied solely because the portfolio contains debt securities. If individual U.S. Treasury or corporate bonds were transferred instead, applicability would require separate examination based on the legal nature of the instrument actually sold.