Rental income earned in India is taxable here

Rental income earned in India shall be taxable in India


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I live in France and I want to buy agricultural land in Punjab. Can I do this in my name, and if that is not possible can I buy it in my younger brother’s name who lives there?

—Shabbir Ahluwalia

There is no income tax implication on purchase of immovable property. But as per the Foreign Exchange Management Act, 1999, while persons of Indian origin can purchase immovable property in India, they cannot buy agricultural land, farmhouse and plantation. However, you could seek a specific approval from the Reserve Bank of India to purchase agricultural land. Your younger brother, who stays in India and is a resident in India, may buy the agricultural land in his name.

My husband moved to the US in November 2015. Our children and I joined him in February. I have a savings account with an Indian bank; do I need to change the account type or the modify existing account details? I receive rental income in my savings account every month. How will this be taxed now? Also, our house has been put on sale. My husband and I are co-owners. How will this income be taxed?

—Bithika

Any income, the source of which is located in India is taxable in India. So, rental income earned in India shall be taxable in India.

When you sell your house in India, the capital gain arising from the sale, i.e., the difference between sale consideration and cost of acquisition of the house property, shall be taxable. Taxability of capital gain will depend on the period of holding. If the property is held for more than 36 months, it will be considered as a long-term capital gain (LTCG), which is subject to a tax rate of 20% (excluding surcharge and education cess) after indexation of cost. If the property is held for lesser than 36 months, it will be considered as short-term capital gain (STCG). This will be taxable at progressive rates of 10-30% (excluding surcharge and education cess).

Capital gains earned in India from sale of house property shall be taxable in your spouse’s and your hands in the proportion of funds invested by each of you. Capital gains may be claimed exempt if the gains are re-invested in purchase of another residential house property in India or invested in specified bonds. The re-investment is required to be made within a specified period from the date of sale.

As you have gone outside India for an uncertain period, you will qualify as Person Resident Outside India under the exchange control laws of India. You may convert your existing bank accounts as non-resident accounts.

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