Telegraphic transfer buying rate and telegraphic transfer selling rates are used to determine capital gains in INR under first proviso to Section 48 of the Income Tax Act . Meaning of telegraphic transfer buying rate and telegraphic transfer selling rate are given as under :-
TELEGRAPHIC TRANSFER BUYING RATE : –
It is the rate or rates of exchange adopted by the State Bank of India for buying foreign currency having regard to the guidelines specified from time to time by the RBI for buying foreign currency where such currency, made available to that bank through a telegraphic transfer .
TELEGRAPHIC TRANSFER SELLING RATE : –
Telegraphic transfer selling rate is the rate of exchange adopted by the State Bank of India for selling foreign currency where such currency is made available by that bank through telegraphic transfer .
METHOD OF COMPUTING CAPITAL GAINS UNDER FIRST PROVISO TO SECTION 48: –
Step 1 : Convert Sales Consideration to foreign currency used to acquire shares/debentures
Divide Sales Consideration by Average Foreign Currency Rate
= Sales Consideration
Average Foreign Currency Rate on date of Transfer
Step 2: Convert cost of acquisition /into foreign currency used to acquire shares/debentures
Divide Cost of Acquisition by Average Foreign Currency Rate =
= Cost of Acquisition
Average Foreign Currency Rate on date of acquisition
Step 3: Convert expenditure incurred wholly and exclusively on transfer of shares/debentures to foreign currency used to acquire them
= Expenditure on transfer
Average foreign currency rate date of transfer
NOTE : –
Average Foreign currency rate =
Telegraphic transfer buying rate (on applicable date) + Telegraphic transfer selling rate (on applicable date / 2
Step 4 : – Compute Capital Gains
| Particulars Foreign Currency | |
| Sales consideration | XXXX |
| Cost of Acquisition | (XXXX) |
| Expenditure on transfer | (XXXX) |
| Capital Gains | XXXX |
Step 5 : –
The capital gain computed in foreign currency under Step 4 shall be reconverted into Indian currency . Telegraphic transfer buying rate on the date of transfer shall be used to reconvert capital gains in foreign currency into Indian currency .
CONVERSION RATES FOR COMPUTING CAPITAL GAINS UNDER FIRST PROVISO TO SECTION 48
| Particulars | Conversion Rate | Date of conversion |
| Sales consideration | Average of TT buying Rate and TT selling Rate of currency used to acquire shares | Date of transfer of shares or debentures |
| Cost of Acquisition | Average of TT buying Rate and TT selling Rate | Date of acquisition of shares or debentures |
| Expenditure on transfer of Shares/debentures | Average of TT buying Rate and TT selling Rate | Date of transfer of shares or debentures |
| Capital gains | TT buying rate | Date of transfer of shares or debentures |