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I am a citizen of Singapore. I bought an apartment in Chennai in 2014 for 40 lakh. I now intend to sell the flat with no profit. How should I account for the proceeds from the sale? Is there any formality that I should comply with? Funds for the purchase of the apartment had come from my NRE (non-resident external) account. All funds remitted to this account were made from Singapore.

—Name withheld on request

 

Sale of any immovable property in India will be taxable in the year of sale. Any immovable property held for more than 24 months is classified as long-term capital asset and the taxable capital gain on them will be the sale consideration less expenditure, less the indexed cost of acquisition, less the indexed cost of improvement. Long-term capital gain (LTCG) is taxable at 20% (plus applicable surcharge and health and education cess). The LTCG may be claimed as exempt from income tax to the extent that the gain is reinvested in specified bonds in India (within six months from the date of transfer). The exemption is limited to up to 50 lakh per financial year and the bonds will be locked in for five years. Alternatively, LTCG may be claimed as exempt if the capital gains are invested in one residential house in India. If the LTCG remains un-invested till the due date of filing of India tax return (31 July), you have to deposit the amount of capital gain in a capital gain account scheme (not later than the due date of filing tax return) and subsequently withdraw this amount for reinvestment in new residential house within the stipulated period (two/three years, as the case may be). If the entire amount is not reinvested or not deposited in the scheme, the remaining portion of the LTCG will be taxable. As you are a citizen of Singapore, if LTCG on sale of flat in India is taxable as per tax laws in Singapore, you may claim foreign tax credit under applicable provisions of the Double Taxation Avoidance Agreement between India and Singapore.

Sonu Iyer is tax partner and people advisory services leader, EY India.

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