TaxTMI 
TaxTMI 
Capital Gain Tax Computation - u/s 50AA can apply in Foreign Securities (US)
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....apital Gain Tax Computation - u/s 50AA can apply in Foreign Securities (US)<br> Query (Issue) Started By: - PRIYAM KHAMBHATA Dated:- 11-7-2026 Last Reply Date:- 13-7-2026 Income Tax<br>Got 4 Replies<br>Income Tax<br>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 T....
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....OTAL 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 Reply ....
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....By Sanjeev Agarwal: The Reply: Opinion On the facts stated, Section 50AA should generally not apply to the transfer of the U.S.-listed ETFs, namely IUSB, IWO, IWN, BSV and BND, by your client, even though he is a Resident and Ordinarily Resident (ROR) in India for FY 2025-26. Section 50AA is a special provision applicable only to: • Units of a Specified Mutual Fund; and ....
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.... • Market Linked Debentures (MLDs). The definition of a Specified Mutual Fund refers to debt-oriented mutual funds covered under the Income-tax Act and regulated under the Indian mutual fund framework. The U.S.-listed ETFs in question are foreign securities issued by foreign fund houses (iShares and Vanguard) and listed on U.S. stock exchanges. They are not units of a Specified Mutual Fun....
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....d within the meaning of Section 50AA. Accordingly, the transfer of these ETFs should be governed by the general provisions relating to capital gains and not by Section 50AA. The residential status of the assessee (ROR) merely determines that the gains are taxable in India as part of his global income; it does not extend the scope of Section 50AA. Therefore: • If the holding peri....
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....od is 24 months or less, the gain would be Short-Term Capital Gain (STCG) taxable at the applicable normal rates. • If the holding period exceeds 24 months, the gain would generally qualify as Long-Term Capital Gain (LTCG) and be taxed under the normal provisions applicable to foreign securities (subject to the provisions of the Act and the India-USA DTAA, where applicable). Import....
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....ant Caveat: This conclusion is based on the assumption that the investments are direct holdings in U.S.-listed ETFs through an overseas broker. If the investments are instead units of an Indian mutual fund or a fund-of-funds investing overseas, the applicability of Section 50AA would require separate examination. Conclusion: On the stated facts, Section 50AA should not apply to the sale of the ....
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....above foreign ETFs, and the gains should be computed under the ordinary capital gains provisions of the Income-tax Act. Reply By PRIYAM KHAMBHATA: The Reply: Respected Sir Thank you for guidance me. However, In reference to your opinion, I would like to confirm that you have given opinion on Specified Mutual Fund ie US Listed ETFs', but my client has sold US Bond also. Therefore, my qu....
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....ery regarding sold out VANGUARD SHORT TERM BOND - BSV VANGUARD TOTAL BOND MARKET - BND Whether, it is covered under Market Linked Debentures (above stated Bonds US), In this regards, the provision of section 50AA - Special provision for computation of capital gain on sold of Foreign Bonds will apply. Please guide me Thanks Reply By Sanjeev Agarwal: The Reply: Thank you for your cl....
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....arification. In my earlier opinion, I had considered the transaction as relating to US-listed ETFs (Specified Mutual Fund units). However, the securities now referred to by you are: • Vanguard Short-Term Bond ETF (BSV) • Vanguard Total Bond Market ETF (BND) These are Exchange Traded Funds (ETFs) and not bonds issued by an issuer. Although the underlying inv....
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....estments comprise debt securities/bonds, the asset transferred by the investor is the unit of the ETF, and not the underlying bonds themselves. Accordingly, these instruments should not be regarded as Market Linked Debentures merely because they invest in bonds. Therefore, the applicability of Section 50AA cannot be concluded solely on the basis that the underlying portfolio consists of bonds. ....
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.... However, if the client has actually sold individual US bonds (such as US Treasury Bonds or Corporate Bonds) and not ETF units, the tax position would require a separate examination, as the applicability of Section 50AA would depend upon the legal nature of the instrument transferred. Accordingly, I request you to kindly confirm whether the securities sold were: • Units of Van....
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....guard ETFs (BSV/BND); or • Actual US bonds/debt securities. Based on this confirmation, a conclusive opinion on the applicability of Section 50AA can be provided. Reply By PRIYAM KHAMBHATA: The Reply: Respected Sir Thank you for guidance me. In reference to your opinion against Issue Id 121016, I am clarifying that my client has sold following US Market Bonds during the ....
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....FY 2025-26 VANGUARD SHORT TERM BOND - BSV VANGUARD TOTAL BOND MARKET - BND In this connection, the provision of section 50AA - Special provision for computation of capital gain on sold of Foreign Bonds will apply. Please guide me Thanks<br> Discussion Forum - Knowledge Sharing ....