With multiple taxes looming large for Non-Resident Indians (NRIs) interested to sell property in India, there are several people who never even bother to get into any transaction, thinking a big loss is around the corner. But considering that an NRI has to abide to rules adhered in both India and his country of residence, he has a lot on his plate with respect to rules and regulations before getting into a deal. Taxation is one of the most important elements in a case such as this. Below are some handy taxation tips an NRI must keep in mind before selling a property in India:
Capital gains: Once an NRI decides to sell a property, he will be charged capital gains on the transaction amount. The capital gain is long term and charged at 20 per cent if the property sold is more than three years old. In case the property sold is less than three years old, then the capital gain will be short term and charged at 30 per cent. Here is how capital gain is calculated:
Capital gain = sale value – indexed cost of purchase
Indexed cost of purchase is the cost of purchase adjusted to inflation. Any qualified chartered accountant can provide help on how the value adjusted to inflation is calculated.
Tax deducted at source: Tax deducted at source (TDS) goes hand in hand with capital gain. Looking at the perspective of an NRI, if he is selling a property that is more than three years old, he will be liable to pay a TDS of 20 per cent on long term capital gain. In case the property is less than three years old, then looking at the calculation of the TDS charged, it will be 30 per cent on short term capital gain.
Tax exemption under section 54: An NRI can get a tax exemption under section 54. This will come into play when after selling a property that is more than 3 years old, an NRI purchases a property within two years. The cost of the entire new property bought will be considered under waiver of tax.
Tax exemption under section 54EC: Waiver under section 54EC is applicable when an NRI sells a property that is more than three years old, and purchases capital gain bonds of NHAI and REC within six months. In such a scenario, money is locked in the bonds for a period of three years.
Total tax: Taxation rules vary from one country to another. At the sale of any property, an NRI must check with his accountant whether the transaction made in India will be clubbed with his taxation account in his country of residence or not.
If the clubbing is possible, then he will be liable for an additional tax, along with tax from his income in his country of residence. This can take its course after furnishing the general documents pertaining to sale of property in India. In case the country, where the person resides, does not allow the tax to be clubbed, then the NRI will have to apply for taxation separately in India, other than filing tax in his country of residence.
While there is a significant amount that is charged as tax when an NRI sells a property in India, the money can be swiftly saved if he decides to purchase a new property. If he does not want make such a purchase, the money can be locked in capital gain bonds. Even if the NRI is not interested in locking any money in bonds, he should go ahead and take the plunge as taxation is fairly simple in such a scenario, breaking the myth that it is complicated and has loopholes.
Source: http://www.99acres.com/articles/tax-tips-for-nris-selling-property-in-india.html
Capital gains: Once an NRI decides to sell a property, he will be charged capital gains on the transaction amount. The capital gain is long term and charged at 20 per cent if the property sold is more than three years old. In case the property sold is less than three years old, then the capital gain will be short term and charged at 30 per cent. Here is how capital gain is calculated:
Capital gain = sale value – indexed cost of purchase
Indexed cost of purchase is the cost of purchase adjusted to inflation. Any qualified chartered accountant can provide help on how the value adjusted to inflation is calculated.
Tax deducted at source: Tax deducted at source (TDS) goes hand in hand with capital gain. Looking at the perspective of an NRI, if he is selling a property that is more than three years old, he will be liable to pay a TDS of 20 per cent on long term capital gain. In case the property is less than three years old, then looking at the calculation of the TDS charged, it will be 30 per cent on short term capital gain.
Tax exemption under section 54: An NRI can get a tax exemption under section 54. This will come into play when after selling a property that is more than 3 years old, an NRI purchases a property within two years. The cost of the entire new property bought will be considered under waiver of tax.
Tax exemption under section 54EC: Waiver under section 54EC is applicable when an NRI sells a property that is more than three years old, and purchases capital gain bonds of NHAI and REC within six months. In such a scenario, money is locked in the bonds for a period of three years.
Total tax: Taxation rules vary from one country to another. At the sale of any property, an NRI must check with his accountant whether the transaction made in India will be clubbed with his taxation account in his country of residence or not.
If the clubbing is possible, then he will be liable for an additional tax, along with tax from his income in his country of residence. This can take its course after furnishing the general documents pertaining to sale of property in India. In case the country, where the person resides, does not allow the tax to be clubbed, then the NRI will have to apply for taxation separately in India, other than filing tax in his country of residence.
While there is a significant amount that is charged as tax when an NRI sells a property in India, the money can be swiftly saved if he decides to purchase a new property. If he does not want make such a purchase, the money can be locked in capital gain bonds. Even if the NRI is not interested in locking any money in bonds, he should go ahead and take the plunge as taxation is fairly simple in such a scenario, breaking the myth that it is complicated and has loopholes.
Source: http://www.99acres.com/articles/tax-tips-for-nris-selling-property-in-india.html
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