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Business News/ Money / Calculators/  Wealth tax not levied on RNOR’s property abroad
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Wealth tax not levied on RNOR’s property abroad

Once you become ordinarily resident, you'll be liable to wealth tax on the property situated abroad

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I will be returning to India after having stayed abroad for around 20 years. I have a house in India as well as one in Australia. Can I retain the house that I have in Australia? What would be the tax consequences of doing so, including any wealth tax liabilities?

—Harshad

According to section 6(4) of the Foreign Exchange Management Act, 1999, any property acquired by you outside of India when you were a non-resident could be continued to be held by you once you become a resident for exchange control purposes. I am assuming that you are returning permanently to India and will qualify to become a tax resident of India for the years subsequent to your return.

Any income earned from the immovable property either by way of rent or as consideration for transfer would be taxable in India.

However, such income may also be taxable in the country in which the immovable property outside India is located.

You should, therefore, examine the provisions of the double taxation avoidance agreement (DTAA) that India may have with the country in which the property is located, to determine the details of the taxability of income arising from the immovable property located abroad and availability of credit paid in such country against your taxes in India.

Apart from this, an individual is subject to wealth tax at the rate of 1% on certain specified assets owned by him in excess of 30 lakh. Immovable property being a house qualifies to be one such specified asset irrespective of whether it is located in India or outside India.

However, you will not be subject to wealth tax in respect of one house property. For the other house property, you may be subject to wealth tax in India subject to your tax residential status in India. If you are a resident and ordinarily resident, your assets located outside India would be subject to wealth tax.

If you are a resident but not ordinarily resident (RNOR) or a non-resident then assets located outside India would be not subject to wealth tax in India.

You will qualify to be an RNOR if you are a non-resident in nine out of the 10 previous years or your stay in India in the seven previous years preceding the current year does not exceed 729 days. Consequently, if you qualify to be a RNOR, you will not be subject to wealth tax in respect of your house located in Australia.

However, once you become ordinarily resident in India, you will be liable to wealth tax on the property situated outside India.

Queries and views at mintmoney@livemint.com

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Published: 22 Jan 2015, 06:22 PM IST
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