Post the retrospective amendment introduced by the Finance Act, 2012, India taxes the capital gains arising to a non-resident on transfer of shares of a foreign company if such shares derives its value substantially from the assets located in India ( i.e. the fair market value (FMV) of assets located in India exceeds Rs. 10 crores; and FMV of assets located in India represents at least 50% of FMV of total assets of the foreign company or entity).
Recently, the CBDT has released draft rules specifying the method for determination of FMV of the Indian assets vis-a-vis global assets of the foreign company (Rule 11UB), way of determination of proportionality of capital gain taxable in India (Rule 11UC), and the manner of reporting requirement on the Indian concern in which the foreign company holds the assets in India (Rule 114DB).
Apart from above, the CBDT also proposes to prescribe Form no. 3CT [Income attributable to assets located in India under section 9 of the IT Act] to be submitted by the transferor of shares, and Form no. 49D [Information and documents under section 285A of the IT Act] to be submitted by the Indian concern.
These draft rules and forms are available for comments from stakeholders and comments are to be sent by 29th May, 2016.
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