Sale of property in India attracts capital gains tax

If the property is sold after three years from the date of purchase by the previous owner, long-term capital gains tax is payable at 20%


I have been working in the US for about 10 months. I get my salary in dollars and pay my taxes in the US. However, my company gave me a performance bonus of Rs.2 lakh in India. This reflects in my Form 16 and states that no tax has been deducted apart from profession tax. Do I have to pay tax in India?

—Bhaskar Das

If your total income in India is below the threshold for taxability, i.e. Rs.2.5 lakh for the financial year 2015-16, you are not required to pay any tax in India. The entire amount of bonus received in India is taxable in India. As the total bonus received is less than the maximum income not chargeable to tax in India, your employer has not deducted any tax at source. Depending on your tax residency status in financial year 2015-16 (FY16)—if you qualify as a non-resident (given that you have been outside India for 10 months in FY16)—and if your total income from all sources in India, including bonus, exceeds Rs.2.5 lakh, then you would be required to deposit tax due on total income. Depending on your total income level, tax could vary between 10.3% and 34.608%.

I inherited a house from my parents in India. I want to sell it and bring the money back to the UK. How will I be taxed?

—Arindham Chatterjee

Sale of immovable property located in India attracts capital gains tax. If the property is sold after three years from the date of purchase by the previous owner, long-term capital gains tax is payable at 20% (plus applicable surcharge and education cess). Long-term capital gain is calculated as the difference between sale value and indexed cost of purchase. Indexed cost of purchase is the cost of purchase adjusted to inflation. If you have inherited the property, cost of purchase would be the cost at which your parents bought the property.

If the total period for which the property is held (by your parents and you) is less than three years, then on sale within three years of purchase, short-term capital gains would be payable at the progressive slab rate depending on your income level. Short-term capital gains are calculated as the difference between the sale value and the cost of purchase (no indexation benefit is available).

If the proceeds were to be re-invested in India (before filing of income-tax return), long-term capital gains can be claimed as tax exempt. Eligible products for re-investment include specified bonds and residential house (to be bought within two years or constructed within three years of transfer).

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