I have been working abroad for 10 years. I want to sell a immovable property in India, which I bought after becoming a non-resident Indian (NRI). I bought it through my non-resident ordinary (NRO) account. How will the transaction be taxed?
Since you are an NRI for income-tax purposes, you are liable to pay tax in India only on income earned in India. Since the profit on sale of property is earned in India, you will be liable to pay tax on the capital gains. If the property has been held for more than three years, you will be liable to pay tax (including cess) on long-term capital gains (LTCG) at 20.6%. While arriving at the taxable LTCG, you will also be entitled to a deduction of indexed cost of acquisition, which would be higher than the actual cost of acquisition.
If the property is held by you for less than three years, you will be liable to pay tax on short-term capital gains at normal rates of taxation. In case you do not have any other income, you will be entitled to the benefit of the threshold exemption limits.
Since you are an NRI, the buyer of the property is obliged to withhold the tax at source at 20.6% of the gross consideration if the capital gains are long-term or at 30.9% of the gross consideration if the capital gains are short-term at the time of paying you. It is possible to obtain a lower/nil tax deduction certificate from the income tax assessing officer and furnish it to the buyer who would then deduct tax accordingly.
It may be noted that if the capital gains arise on or after 1 April 2013 and the total income exceeds Rs.1 crore, there is a surcharge of 10% leviable on the tax payable before computing cess. Since the property is acquired out of NRO funds, the sales proceeds will be credited to your NRO account. As an NRI, you are allowed to repatriate up to $1 million every financial year out of the balance lying in the NRO account subject to a certificate from a chartered accountant that applicable income-tax has been paid.
If an individual incurs losses in a foreign country, can it be set off against income in India?
If you are an individual who is a tax resident of India, then you are liable to pay tax on your global income as well. This income will include losses that you incur globally. Hence, if any losses are incurred in a foreign country, it would also be considered in the computation of your income and will be set off against the income under the same head or other heads subject to the restrictions provided in the Income-tax Act. For example, if a resident individual has incurred a short-term capital loss on sale of a capital asset held outside India, the same would be eligible for being set off only against income under capital gains (long- and short-term) and not under any other head of income.
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