Rule 52 — Rate of exchange for conversion of rupees into foreign currency and reconversion of foreign currency into rupees for purpose of computation of capital gains under section 72. Made under s.72 of the Income-tax Act, 2025.
Rule 52 gives effect to Section 72 of the Income-tax Act, 2025. A rule cannot go beyond the section it serves: where the two seem to differ, the section governs.
Sub-rule (1) fixes the rate of exchange for computing capital gains on the transfer of a capital asset being shares in, or debentures of, an Indian company, where the assessee is a non-resident. It works by a Table of four circumstances in column B, each with its own rate in column C. For converting the cost of acquisition, the rate is the average of the telegraphic transfer buying rate and telegraphic transfer selling rate of the foreign currency initially utilised in the purchase of the asset, as on the date of its acquisition. For converting the expenditure incurred wholly and exclusively in connection with the transfer, the rate is that same average, but as on the date of transfer of the capital asset. For converting the full value of consideration received or accruing as a result of the transfer, again that average as on the date of transfer. For converting the capital gains computed in the foreign currency initially utilised in the purchase back into rupees, the rate is the telegraphic transfer buying rate of such currency, as on the date of transfer of the capital asset.
Sub-rule (2) defines the two rates. "Telegraphic transfer buying rate" takes the meaning assigned to it in rule 206. "Telegraphic transfer selling rate", in relation to a foreign currency, means the rate of exchange adopted by the State Bank of India constituted under the State Bank of India Act, 1955, for selling such currency where such currency is made available by that bank through telegraphic transfer.
Section 72 computes a non-resident's gain on Indian shares and debentures in the foreign currency originally invested, so that a fall in the rupee does not create a taxable gain that the investor never made. That mechanism needs four conversions and each needs a rate and a date, which the section does not supply. Rule 52 supplies them, and pins every rate to a published State Bank of India rate rather than a rate the parties choose.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Rate for converting the cost of acquisition | Average of the telegraphic transfer buying rate and telegraphic transfer selling rate of the foreign currency initially utilised in the purchase, as on the date of acquisition | The currency is the one initially utilised in the purchase of the asset | Rule 52(1), Table Sl. No. 1 |
| Rate for converting expenditure on the transfer | Average of the telegraphic transfer buying and selling rates of that same currency, as on the date of transfer of the capital asset | Expenditure incurred wholly and exclusively in connection with the transfer | Rule 52(1), Table Sl. No. 2 |
| Rate for converting the full value of consideration | Average of the telegraphic transfer buying and selling rates of that same currency, as on the date of transfer of the capital asset | Consideration received or accruing as a result of the transfer | Rule 52(1), Table Sl. No. 3 |
| Rate for reconverting the capital gains into rupees | The telegraphic transfer buying rate of such currency, as on the date of transfer of the capital asset | Applies to the gain computed in the foreign currency initially utilised in the purchase; not the average of the two rates | Rule 52(1), Table Sl. No. 4 |
One currency governs the whole computation — the foreign currency initially utilised in the purchase — so a taxpayer who funded the purchase in one currency and received the sale proceeds in another still converts through the currency of purchase. Three of the four conversions use the average of the buying and selling rates; the fourth, the reconversion of the gain into rupees, uses the telegraphic transfer buying rate alone, and treating all four alike is the commonest way to get the figure wrong. The dates are not uniform either: only the cost of acquisition takes the rate as on the date of acquisition, while transfer expenditure, consideration and the reconversion all take the date of transfer. The rule sets none of this as an option; it decides the rate, and the entitlement to compute in foreign currency at all is section 72's.
A non-resident buys shares of an Indian company with US dollars and later sells them. The cost of acquisition is converted at the average of the telegraphic transfer buying and selling rates for US dollars on the date of acquisition; the sale consideration and the brokerage on sale are converted at the average of those two rates on the date of transfer. The resulting gain, expressed in US dollars, is then brought back to rupees at the telegraphic transfer buying rate for US dollars on the date of transfer — not at the average, and not at the rate on the date the money is remitted.
You meet it in the capital gains computation annexed to a non-resident's return, and in any assessment where the Department checks which State Bank of India rate and which date were used for each of the four conversions.
The telegraphic transfer buying rate of such currency, as on the date of transfer of the capital asset.
the rate of exchange adopted by the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), for selling such currency where such currency is made available by that bank through telegraphic transfer