section 10(38)

[Sunil K. Jain]

Under section 10 (38) of Income Tax Act, the Capital Gain on sale of shares held for more then 12 months is exempt if the shares under consideration are listed on a  stock exchange in India.

What is the position if ESOP are allotted and sold outside India, ( employee is Indian resident ,working and based in India) on foreign stock exchange and the sale price also recieved in another country. Is there tax exemtion on capital gains for this type of gain in any other section of the income tax act.

 

[sanjeev bajaj]

Dear Sunil K. Jain

Section 10(38) is not applicable in this case as no STT is charged/paid.

There is no other section where exemption is applicable to this.

You have not clarified whether the shares sold are listed in stock exchange of India or not.

If not then it will be LTCG if shares are held for more than 36 months otherwise it will be STCG (See definition of STCG)

If it is listed in Stock exchange of India then clause d of sub section (1) of Section 112 will apply and 10% rate will be applicable.

You have also see the DTAA.

Regards

SANJEEV BAJAJ

AI Summary

STT requirement blocks section 10(38) exemption for ESOPs sold abroad; tax treatment depends on listing and holding period. Section 10(38) is inapplicable to ESOP disposals on a foreign exchange where no STT is charged; no other exemption applies. Tax treatment turns on whether the shares are listed in India and the holding period: unlisted shares yield long-term capital gain if held beyond the long-term threshold, otherwise short-term capital gain; listed shares are taxed under the specific listed-equity capital gains rate. Consideration of the relevant double taxation avoidance agreement is advised.