Home / Money / Personal Finance /  My son who is US citizen wants to sell property in India. How will it be taxed?

My son who is US citizen wants to sell property in India. How will it be taxed?

Where a residential property is held by an individual for more than 24 months immediately preceding the date of transfer, any capital gain arising from transfer of such property is considered as LTCG. (Photo: iStock)Premium
Where a residential property is held by an individual for more than 24 months immediately preceding the date of transfer, any capital gain arising from transfer of such property is considered as LTCG. (Photo: iStock)

  • If an NRI sells a residential property after 24 months from the date of ownership, proceeds from the sale of such property will be considered as long-term capital gain

My son is a US citizen. He owns a residential property here in India. He wishes to sell it. Would you pleas guide us about the tax implications on it? Also, if he doesn't sell it and instead gifts it to his sibling, what will be the tax implications on that?

- Name withheld

The residential status of the person will define tax liability in India. If the person is a non-resident Indian (NRI) as per the provisions of the Income Tax Act, he is liable to pay income tax on income that accrues or arises in India. Hence, if your son owns a residential property in India and wishes to sell it, he shall pay capital gains tax on the gains arising from such sale. However, the tax liability will depend on whether the gain is a short-term or long-term capital gain.

If an NRI sells a residential property after 24 months (reduced from 36 months to 24 months in Budget 2017) from the date of ownership, proceeds from the sale of such property will be considered as long-term capital gain. However, if the residential property is held for 24 months or less, the gain will be short-term capital gain. Tax implications for NRIs are also applicable in the case of inheritance.

Long-term capital gains are taxed at 20% plus cess, and short-term gains are taxed at slab rates applicable to NRIs based on total income, which is taxable in India.

However, when an NRI sells a property, the buyer is liable to deduct a TDS at 20%. And if the property is sold before 24 months, a TDS of 30% is  applicable. The NRI can file ITR and claim the refund of excess tax deducted at source.

To answer the second part of the question, if NRIs gift property to an Indian citizen, where the fair market value of the property exceeds 50,000, it is taxable in the hands of the receiver of the gift. However, if the gift is given to relatives (defined in the Income Tax Act), it is not taxable either to the receiver or the one gifting. Hence, if an NRI gifts residential property to its sibling, it is not taxable.

(Query answered by Archit Gupta, founder and CEO, Clear. Send your queries at mintmoney@livemint.com)

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