BackProceeds from sale of property in India will be taxable for NRIs too
Any property that is held for more than 24 months shall be considered as a long-term capital asset
PremiumI am a non-resident Indian (NRI) living in the US. I have inherited a house in India and want to sell it. Will the proceeds be taxable in my hands? I want to buy another house with the money in one of the metro cities in India. Since the amount is expected to be substantial, some of the money will be left over even after buying a new house in India. How should I repatriate the money to my US account with minimum tax liability?
—T. Kalaigar
The proceeds from the sale of a property situated in India shall be taxable in India. Capital gains on property that is inherited are taxable in the hands of the inheritor. For the purpose of calculating gains, the period of holding of the original owner shall also be considered. Also, the cost of acquisition of the original owner shall be taken as the cost of acquisition for the purpose of calculating capital gains in your hands.
Any property that is held for more than 24 months shall be considered as a long-term capital asset. Long-term capital gains (LTCG) are calculated by deducting the indexed cost of acquisition from the sale price. LTCG is taxable at the rate of 20% (additional cess and surcharge).
If you re-invest your capital gains in specified bonds or a residential house in India, you can claim exemption from LTCG tax. The new house should be purchased one year before or two years after the date of transfer or constructed within a period of three years from the date of transfer.
You can also invest in capital gains bonds up to ₹50 lakh in one financial year. The property should not be sold within three years of the purchase and the bonds can’t be sold for five years.
As per the Reserve Bank of India (RBI) rules, NRIs are allowed to remit up to $1 million from the sale proceeds of a property in India from their non-resident ordinary (NRO) account based on a certificate from a chartered accountant, as prescribed.
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I am a US national and an OCI (Overseas Citizen of India). I don’t pay any tax in India. My father is an Indian national and is looking to send me money in excess of ₹50,000. Would he have to pay additional taxes in order to send me the money? If so, what are the limits on the amount of money he can send in a given year? How much tax would he or I have to pay in India? Also, the amount received would be well below the amount of gift threshold (about $14,000) that is taxable within the US. Please advise.
—Name withheld on request
Any gifts made to relatives are exempt from tax in India. As per the Income-tax Act, gifts exchanged between son and father are not taxable in either’s hands. Therefore, you are allowed to receive this gift from your father without any tax implication for you or for your father.
Also, there is no monetary restriction on such gifts. As per current rules, a resident can send $2,50,000 in one financial year. Certain forms such as Form 15CA and Form 15CB may be required by the bank, and an expert can assist you with these. Note that TCS (tax collected at source) might apply to the remittance being made, and such TCS may later be adjusted against your father’s tax dues or else can be claimed as a refund.
Archit Gupta is founder and chief executive officer, ClearTax. Queries and views at mintmoney@livemint.com
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