How is a share transfer between an Indian and a foreign shareholder taxed?

Cross-border share transfers trigger a withholding tax obligation on the buyer, calculated on the seller's capital gains — not the full transaction value — determined by the purchase price, the shares' cost basis, and the holding period (which affects whether the gain is short-term or long-term). Before any payment can be made, the seller needs a PAN so the withholding tax can be credited against them, and the buyer needs a Tax Deduction Account Number (TAN) to remit that tax.

Where a tax treaty applies, its terms — and the buyer's compliance with treaty documentation like Form 10F and a Tax Residency Certificate — can affect the applicable rate. Getting the valuation and holding-period facts right before signing avoids a mismatched withholding calculation surfacing as a problem after the money has already moved.