Do NRIs have less advantage than residents on indexation benefits

Is it true that non-resident Indians (NRIs) can no longer avail of the indexation benefit, while residents still can?
—Name withheld on request

Vide The Finance (No. 2) Act, 2024, there have been significant revisions to the scheme of taxation for capital gains. Taxpayers can continue to use the fair market value as on 1 April 2001 for assets acquired before that date. 

However, the benefit of indexation for the purpose of computing long-term capital gains, arising on or after 23 July 2024, has been removed for all taxpayers except under one circumstance. 

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Indexation benefit has been retained for the purpose of determining the tax payment on long-term capital gains arising from sale of land or building in the hands of resident individuals and Hindu undivided families (HUFs) provided such land or building was acquired before 23 July 2024.

The process works as follows: Resident individuals or HUFs must calculate the tax on long-term capital gains from such asset at12.5%, and compare it with tax calculated at 20% using indexation. 

They will then pay tax on the lower of the two amounts. If applying the indexation benefit results in a loss, the loss will be disregarded.

To this extent, it creates a discrepancy between the tax treatment of long-term capital gains from sale of land or building (acquired pre-23 July 2024) by resident individuals or HUFs, and other taxpayers.

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I have been settled in Canada for many years and have yet to file my Indian tax return. My brother, who resides in India, informed me that all taxpayers must disclose their residential properties outside India when filing their tax returns. As a Non-Resident Indian (NRI), do I also need to disclose my Canadian property in my Indian tax return?

—Name withheld on request

Schedule FA (Foreign Assets) is the relevant schedule in income tax return under which details of foreign assets and foreign source incomes need to be disclosed. 

However, this is applicable only if you are a ‘resident and ordinary resident’. Assuming you are NRI, you do not have any obligation to disclose your Canadian house property under Schedule FA since it is not applicable to NRIs.

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Harshal Bhuta is a partner at chartered accountancy firm P.R. Bhuta & Co

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