Made profits on Apple or Nvidia shares? Here's whether you can claim the ₹1.25 lakh tax exemption in India

The ₹1.25 lakh annual LTCG exemption applies to Indian equity investments, but does it also apply to foreign stocks held by an Indian investor? Check details here.

Finance Minister Nirmala Sitharaman recently indicated that the government will hear investors' views on long-term capital gains (LTCG) tax during upcoming Budget consultations, bringing equity taxation back into focus.

The discussion comes amid calls for tax relief, foreign investor outflows and concerns over the competitiveness of Indian equities.

Those who put money in stocks and equity-oriented mutual funds are liable to pay tax on profits earned from selling them, though the applicable rate depends on whether the gains are short-term or long-term in nature.

Long-term capital gains on eligible investments held for more than 12 months are exempt from tax up to ₹1.25 lakh in a financial year.

Does ₹1.25L tax exemption apply to foreign stocks?

Indian investors who have made gains on global stocks such as Apple, Tesla and Nvidia may assume that the same exemption applies to their overseas investments. But, is that the case?

The one word answer to that question is no. “The exemption of ₹1.25 lakh is available on certain long-term gains from qualifying Indian equity investments only and it does not benefit US-listed stocks,” according to Gaurav Makhijani, Managing Partner at Makhijani Gera & Associates LLP.

How are LTCG and STCG on foreign stocks calculated?

The taxable capital gain on overseas shares is calculated by subtracting the cost of acquisition and eligible transfer-related expenses from the sale proceeds. Investors must also apply the prescribed foreign-exchange conversion rules to determine the gains in Indian rupees.