NRIs are subject to TDS on capital gains; the rate of TDS is 10% on the capital gains earned.
NRIs do not have the option of adjusting their capital gains against the basic exemption limit of ₹2.5 lakh
An Indian resident of foreign origin had two shares that the family did not know of. The family, who lives in the UK and are citizens there, got to know of the shares 20 years after this person dies. The father left a will that all his money will go to his two children, who are now senior citizens. The family gave me a power of attorney to deal with them. I got the shares transferred to a demat account. I have now sold one of the shares and wish to remit the money to the children. The value is ₹20 lakh. Will this amount be taxable in the hands of the senior citizens? If yes, how much tax will be payable?
The recipients from the inheritance are citizens and tax residents of the UK. However, income earned from the sale of shares in India shall be taxable in India. Capital gains tax shall apply in the case of sale of shares. In the case of inheritance, for the purpose of calculating capital gains, the purchase price paid by the original owner shall be considered for the inheritors.
Also, the period of holding of the original owner shall be included for the purpose of identifying whether the gains are long- or short-term holdings. There are long-term capital gains (LTCG), according to the information provided by you. LTCG from sale of equity shares are taxed at 10% (additional cess and surcharge) on gains exceeding ₹1 lakh. Grandfathering of cost of acquisition is allowed up to 31 January 2018.
Note that NRIs are subject to TDS (tax deducted at source) on capital gains; the rate of TDS is 10% on the capital gains earned. Also, NRIs do not have the option of adjusting their capital gains against the basic exemption limit of ₹2.5 lakh.
To prevent LTCG from getting taxed in the country of their residence, NRIs may claim relief based on the Double Tax Avoidance Agreement between the two countries.
Archit Gupta is founder and chief executive officer, ClearTax. Send in your queries and views at email@example.com