Non-resident Indians can’t open a new PPF account

A resident who becomes a non-resident Indian (NRI) may continue to deposit funds into his existing PPF account


Ramesh Pathania/Mint
Ramesh Pathania/Mint

I live in London and plan to sell my flat in Mumbai, which I inherited two years ago. The asset was acquired by my father more than 20 years ago. What will be the tax implications if I sell this property?

—Rakesh Bakshi

Any gain arising on the sale of property is taxable in the year of transfer and is subject to capital gains tax. Depending on the period of holding of the property, capital gain will be considered as either: long-term capital gain (LTCG) if period of holding is more than 36 months, or short-term capital gain (STCG) if period of holding is less than 36 months.

As you had inherited the property, the period of holding of the previous owner (your father) would also be taken into consideration. Hence, LTCG would arise on sale of this property.

The difference between the sale price and indexed cost of acquisition will be taxable as LTCG at the flat tax rate of 20% (plus applicable surcharge and education cess). The cost of acquisition shall be the cost incurred by your father to acquire the property.

LTCG can be claimed as exempt from tax to the extent it is re-invested in India in another residential property or specified bonds subject to certain specified conditions.

If due to some reason, the capital gains remain un-invested until the due date of filing of India tax return (i.e., 31 July), then the amount of capital gains could be deposited in a capital gains account scheme with a bank (not later than the due date of filing your India tax return) and subsequently withdrawn for specified re-investment.

Any loss on the sale of property can be carried forward up to eight years from the year of sale by filing a tax return and be offset against long-term or short-term capital gains.

I had opened a Public Provident Fund (PPF) account when I was an Indian resident, but now I’m a non-resident Indian (NRI). Can I continue contributing to my PPF account? Is my annual investment limit still Rs.1.5 lakh?

—Vivek Kumar

As per Rule 3 of the Public Provident Fund Scheme, non-residents are not eligible to open a PPF account and only Indian residents can open one. However, a resident who becomes an NRI may continue to deposit funds into his existing PPF account. So you can continue contributing to your existing PPF account. You would also be entitled to claim tax deduction under section 80C of the Income-tax Act, 1961, on account of contribution made up to Rs.1.5 lakh.

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