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I moved to the US 15 years ago. A few years ago I became a citizen there. I have some ancestral property in India, which I want to sell. How will this be taxed? Will I have to pay any tax in India? How should I file taxes as I do not have PAN or Aadhaar?
Sale of property situated in India will be taxable in India in the year of sale of property. Any immovable property held for more than 24 months is classified as long-term capital asset. For ancestral property, the holding period would be calculated from 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) less cost of improvement less cost of transfer. Long-term capital gain (LTCG) is taxable at 20% plus surcharge, and education cess.
With effect from 01 April 2017, the base for calculating the indexed cost of acquisition has been revised from 01 April 1981 to 01 April 2001.
The LTCG may be claimed as tax exempt to the extent it is re-invested in a house:
(a) Purchased one year before the date of transfer
(b) Purchased two years after the date of transfer
(c) Constructed within 3 years after the date of transfer
Further, the exemption is available only if the residential house is purchased and constructed in India.
Also, LTCG can be claimed exempt if it is re-invested in specified bonds in India. If the LTCG is not invested until the due date of filing of tax return in India (i.e., 31 July), you may put the amount of capital gain in a Capital Gain Account Scheme (CGAS) with a bank and withdraw this amount for reinvestment in India.
If the entire amount is not reinvested or deposited in CGAS, the remaining portion of the gain will be taxable. Tax 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 a return along with interest by 31 July. The liability to pay instalment for advance tax will arise after the sale transaction. In case the income is taxable in the US, then benefit under the Double Taxation Avoidance Agreement between India and the US may be explored to avoid double taxation.
As per a recent notification, Aadhaar is not required for an individual who is not a citizen of India for filing income-tax returns. But in case you do not have a PAN, it is advisable to apply for the same.
Sonu Iyer is tax partner and people advisory services leader, EY India.
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