Rule 52 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rule 52 of the Income-tax Rules, 2026 sets a four-row exchange rate table for a non-resident computing capital gains on shares or debentures of an Indian company under section 72.
The scope
Sub-rule (1) applies to computing capital gains arising from the transfer of a capital asset being shares in, or debentures of, an Indian company, in the case of an assessee who is a non-resident. It has no application to a resident, and none to any other class of asset. The 1962 parallel is rule 115A.
The four-row table
| Sl. | What is being converted | Rate of exchange |
|---|---|---|
| 1 | The cost of acquisition of the capital asset | The average of the TT buying rate and the TT selling rate of the foreign currency initially utilised in the purchase, as on the date of its acquisition |
| 2 | The expenditure incurred wholly and exclusively in connection with the transfer | The average of the TT buying and TT selling rates of that currency, as on the date of transfer |
| 3 | The full value of consideration received or accruing as a result of the transfer | The average of the TT buying and TT selling rates of that currency, as on the date of transfer |
| 4 | The capital gains computed in the foreign currency initially utilised in the purchase, into rupees | The telegraphic transfer buying rate of that currency, as on the date of transfer |
Rows 1 to 3 of rule 52 use the average of the buying and selling rates; row 4 uses the buying rate alone. The difference is deliberate. The first three convert rupee amounts into the foreign currency, where a mid-rate is the neutral measure; the fourth converts the resulting gain back into rupees, which is a receipt, so the buying rate applies. Using the average in row 4 is the commonest error and overstates or understates the gain in every case.
Note also which currency the rule uses throughout: the foreign currency initially utilised in the purchase of the asset. It is not the currency of the assessee's residence, nor the currency in which the sale was settled. If the shares were bought with US dollars and sold for euros, every row of the table still runs on dollars.
The two rates defined
| Term | Meaning |
|---|---|
| Telegraphic transfer buying rate | Has the meaning assigned to it in rule 206 |
| Telegraphic transfer selling rate | 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 |
Both rates are therefore State Bank of India rates, and both are read on a specific date — the date of acquisition for row 1, and the date of transfer for rows 2 to 4. A month-average or a rate taken from a commercial provider does not satisfy the rule.
Rule 51 — the condition next to rule 52 on the original fund
Rule 51 sits immediately before rule 52 and deals with a different corner of the same chapter. For the purposes of section 70(2) , where a capital asset is transferred to a resultant fund being a Category III Alternative Investment Fund, the original fund must satisfy the condition that:
"the aggregate participation or investment in the original fund, either directly or indirectly, by persons resident in India does not exceed 5% of the corpus of such fund at the time of such transfer."
Sub-rule (2) takes "original fund" and "resultant fund" from section 70(2) . Three features matter: the test is on aggregate Indian participation, it counts indirect holdings, and it is measured at the time of the transfer rather than at any year end.
Worked example
| Facts | Position under rule 52 |
|---|---|
| Non-resident bought shares of an Indian company using US dollars | Every conversion runs on US dollars |
| Cost of acquisition | Average of TT buying and selling on the acquisition date |
| Brokerage on sale | Average on the transfer date |
| Sale consideration | Average on the transfer date |
| Dollar gain reconverted to rupees | TT buying rate on the transfer date |
| Sale settled in euros | Still converted through dollars — the currency initially utilised |
| Resident assessee with a foreign-currency purchase | Outside rule 52 |
| Indian residents hold 6% of an original fund's corpus at the transfer date | Rule 51 condition fails |
Compliance checklist
- Confirm the assessee is a non-resident and the asset is shares or debentures of an Indian company.
- Identify the foreign currency initially utilised in the purchase and use it throughout.
- Use the average of TT buying and selling for cost, transfer expenditure and consideration.
- Use the TT buying rate alone to reconvert the gain.
- Read the rates on the acquisition date for row 1 and the transfer date for rows 2 to 4.
- Take both rates from the State Bank of India, per rule 206 and the sub-rule (2)(b) definition.
- Keep dated rate evidence with the computation.
- For a fund relocation, test the 5% Indian participation condition in rule 51 at the time of transfer, counting indirect holdings.
Common mistakes
- Using the average rate to reconvert the gain in row 4.
- Converting through the settlement currency rather than the currency of purchase.
- Using the transfer-date rate for the cost of acquisition.
- Taking rates from a commercial source rather than the State Bank of India.
- Applying the rule to a resident or to an asset other than shares or debentures.