Immovable property held for over 36 months is a long-term capital asset
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I inherited a house from my grandparents in India. I want to sell it and bring the money back to Australia. How will I be taxed?
Sale of property situated in India will be taxable in the year of sale of property. Any immovable property held for a period of more than 36 months is classified as long-term capital asset.
For inherited property, the holding period would be calculated from the date of acquisition by the original owner.
In case of a long-term capital asset, taxable capital gain will be sale proceeds less indexed cost of acquisition (i.e., adjusted as per cost of inflation index or CII) less cost of improvement less cost of transfer (like brokerage, among other things).
Long-term capital gain (LTCG) is taxable at 20% plus surcharge, if applicable and education cess. The LTCG can be claimed as exempt from tax to the extent it is re-invested in India in specified bonds or a residential house (to be either purchased within 2 years or constructed within 3 years of transfer of the land).
There are certain restrictions, however, on the sale of new house bought and the quantum of investment made in bonds.
If the capital gains remain un-invested until the due date of filing of India tax return (i.e., 31 July) for the relevant financial year, you may put the amount of capital gains in a capital gains account scheme with a bank (not later than the due date of filing your India tax return) and subsequently withdraw this amount for re-investment.
If the entire amount is not reinvested or not deposited in capital gains account scheme, the remaining portion of the gain will be taxable.
Tax on long term capital gains can be either paid by way of advance tax in four instalments (15% by 15 June, 45% by 15 September, 75% by 15 December and 100% by 15 March) or before filing of a tax return by way of self-assessment tax along with interest by 31 July.
Non-resident Indians (NRIs) are allowed to remit up to $1 million from the sale proceeds of property in India from their non-resident ordinary (NRO) account on production of an undertaking by the remitter together with a certificate issued by a chartered accountant as prescribed to the authorised dealer (bank).
Sonu Iyer is tax partner & people advisory services leader, EY India.
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