I am an Australian citizen. I had purchased a flat in Delhi 16 years back, which I want to sell. Will I need to pay the capital gains tax in India? How much money can I repatriate to Australia in a financial year?
Sale of an immovable property (being a residential flat in your case) will be taxable in India in the year of sale of the property. Any immovable property held for a period of more than 24 months is classified as a long-term capital asset (LTCA).
In the case of an LTCA, the taxable capital gain will be net sale proceeds less indexed cost of acquisition (adjusted as per cost of inflation index (CII)) less indexed cost of the improvement). The long-term capital gain (LTCG) is taxable at 20% (plus applicable surcharge and education cess). The LTCG can be claimed as exempt from Income tax to the extent there is reinvestment in India in specified bonds in India (within six months from the date of transfer) or one residential house in India (to be either purchased within one year before or two years after or constructed within three years of transfer of the LTCA). Also, there is a one-time option to invest in two residential houses in India (to be either purchased within one year before or two years after or constructed within three years of transfer of the long term capital asset) if the long-term capital gain does not exceed ₹2 crore.
For the exemption from income tax to continue, there are restrictions on the sale of a new house and the amount of investment made in bonds.
If the capital gain is not invested till the due date of filing India tax return (31 July), you may deposit the amount of capital gain in a Capital Gains Account Scheme (not later than the due date of filing your India tax return) and subsequently withdraw this amount for reinvestment in a new residential house within the stipulated period. If the entire amount is not reinvested or not deposited in the scheme, the remaining portion of the capital gain will be taxable.
Tax on the capital gain can be either paid by way of advance tax in four instalments (15% by 15 June, 45% by 15 September, 75% by 15 December and 100% by 15 March) or before the filing of tax return by way of self-assessment tax along with interest by 31 July. The requirement to pay advance or self-assessment tax will arise if the buyer of the property does not deduct full tax payable by you.
Under the Indian income-tax law, if the seller qualifies as non-resident in India during the relevant financial year, the buyer is required to deduct TDS (tax deducted at source) at a specified rate (plus applicable surcharge and health and education cess) on taxable capital gain on sale of immovable property.
The specified rate is 20% (plus applicable surcharge and health and education cess) in case of long-term capital gain (LTCG) and 30% (plus applicable surcharge and health and education cess) in case of short-term capital gain (STCG).
Under the exchange control law, as an NRI, you are allowed to remit up to $1 million per financial year from the sale proceeds of a property in India from your non-resident ordinary (NRO) bank account in India. The remittance outside India is permitted on production of documentary evidence of acquisition along with a certificate from a chartered accountant (CA) in the prescribed format. Remittance exceeding $1 million per financial year requires special permission from the Reserve Bank of India. Under Indian tax law, the remitter is required to furnish prescribed information electronically in Form 15CA (self-declaration) based on a certificate obtained from a chartered accountant in Form 15CB, wherever applicable.
Sonu Iyer is tax partner and people advisory services leader, EY India. Queries at email@example.com