Big Win for NRIs: Forex Fluctuation Relief in Capital Gains under Tax Bill 2025

The Income Tax Bill 2025 has introduced a major tax reform that is expected to provide significant relief to non-resident investors. The government has allowed adjustments for foreign exchange fluctuations when computing capital gains on unlisted shares and securities.

Key Change

Under the new framework, non-residents will be able to adjust their acquisition costs for unlisted securities based on currency fluctuations. This ensures that long-term capital gains (LTCG) are calculated on the basis of actual economic gains, rather than being artificially inflated due to rupee depreciation.

Until now, LTCG on unlisted securities was taxed at a flat rate of 12.5% without forex adjustment, resulting in higher tax liabilities whenever the Indian rupee weakened against foreign currencies.

The latest income tax bill of 2025 stipulates that the benefit of foreign exchange fluctuations will only apply to unlisted Indian equity shares, not to listed equity shares as outlined in Section 198.

Timing Amid Rupee Volatility

The reform comes at a critical time. The Indian rupee has seen sharp fluctuations in recent months, falling from ₹83.49 per US dollar in September 2024 to nearly ₹87.67 in October 2025. Investors holding long-term unlisted equity positions were particularly impacted by such volatility, often facing disproportionate tax burdens.

The following illustration provides a simplified example:

Industry Outlook

Experts believe the reform will enhance India’s attractiveness for foreign capital inflows, particularly in growth-stage startups, unlisted companies, and private equity transactions where overseas investment plays a crucial role.

This measure signals the government’s commitment to fair taxation and investment stability. It strengthens confidence among non-residents and creates a more competitive environment for India’s unlisted equity markets.

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