Capital gains on a property situated in India are always taxable in India. Whether a person has to pay tax in India also depends upon their residential status. Assuming this PIO is non-resident in India (NRI), he or she will not have any tax liability in India regarding sale of properties situated outside India. This also applies to those who are resident but not ordinarily resident in India.
For properties situated in India, capital gains have to be computed separately for each. Capital gains may be long term or short term depending upon the period for which these were held. If a property is sold after being held for two years, such gains are considered as long-term capital gains and taxed at 20% (plus applicable surcharge and cess) after indexation of cost. The NRI taxpayer may choose to invest long-term capital gains in another house property or purchase capital gains bonds to prevent taxation of capital gains and claim an exemption on them. If properties are sold within two years of holding, gains are considered as short-term capital gains and are taxable according to taxpayers’ slab rate.
Such an NRI may also be subject to TDS (tax deducted at source) which is deducted from the payment for sale of property. TDS is deducted at 20% (plus applicable surcharge and cess) from sale proceeds in case of long-term capital assets and at 30% (plus applicable surcharge and cess) in case of short-term capital assets for NRIs.
Archit Gupta is founder and chief executive officer, ClearTax. Queries at firstname.lastname@example.org