Buying or selling property in India? Know all about the tax implications

There’s a honest quantity of confusion about tax implications for NRIs who need to promote any home property that they could have in India. This text explores how a lot tax is payable and TDS deductible within the case of NRIs who need to promote property in India.

How are features from property gross sales taxed to NRI?

NRIs promoting home properties in India must pay tax on the Capital Positive factors. The tax payable on the features is determined by whether or not it’s a brief time period or a long run capital acquire.

When a home property is offered, after a interval of two years (Lowered from 3 years to 2 years in Funds 2017) from the date it was owned – there’s a long run capital acquire. In case it’s held for two years or much less – there’s a quick time period capital acquire. Tax implications for NRIs are additionally relevant within the case of inheritance.

If the property has been inherited, bear in mind to think about the date of buy of the unique proprietor to calculate whether or not it’s a long-term or a short-term capital acquire. In such a case, the price of the property shall be the associated fee to the earlier proprietor.

How a lot tax is payable

Long run capital features are taxed at 20%, and quick time period features shall be taxed on the relevant revenue tax slab charges for the NRI primarily based on the whole revenue taxable in India for the NRI.

TDS deductible

When an NRI sells the property, the client is liable to deduct TDS @ 20%. If the property has been offered earlier than 2 years (diminished from the date of buy), a TDS of 30% shall be relevant.

Learn how to save tax on capital features

NRIs are allowed to say exemptions underneath part 54 and Part 54EC on long run capital features from the sale of home property in India.

Exemption underneath part 54

It’s out there when there’s a long run capital acquire on the sale of home property of the NRI. The home property could also be self-occupied or set free. Please be aware – that you simply would not have to speculate all the sale receipt however the quantity of capital features. After all, your buy value of the brand new property could also be larger than the quantity of capital features. Nevertheless, your exemption shall be restricted to the whole capital acquire on the sale.

Additionally, you should buy this property both one yr earlier than the sale or 2 years after the sale of your property. You might be additionally allowed to speculate the features within the development of a property, however development have to be accomplished inside 3 years from the date of sale.

Exemption underneath part 54F

It’s out there when there’s a long run capital acquire on the sale of any capital asset aside from a residential home property. To assert this exemption, the NRI has to buy one home property inside one yr earlier than the date of switch or 2 years after the date of switch or assemble one home property inside 3 years after the date of switch of the capital asset. This new home property have to be located in India and shouldn’t be offered inside 3 years of its buy or development.

Additionally, the NRI shouldn’t personal multiple home property (in addition to the brand new home) and nor ought to the NRI buy inside 2 years or assemble inside 3 years another residential home.

Right here all the sale receipt is required to be invested. The capital features are totally exempt if all the sale receipt is invested. In any other case, the exemption is allowed proportionately.

Exemption can be out there underneath part 54EC

It can save you the tax in your long run capital features by investing them in sure bonds. Bonds issued by the Nationwide Freeway Authority of India (NHAI) or Rural Electrification Company (REC) have been specified. These are redeemable after 5 years (Earlier than 2018, it was 3 years) and should not be offered earlier than the lapse of 5 years (Earlier than 2018, it was 3 years) from the date of sale of the home property.

Word that you simply can’t declare this funding underneath another deduction. You might be allowed 6 months to spend money on these bonds – although to have the ability to declare this exemption, you’ll have to make investments earlier than the return submitting date.

The Funds for 2014 has specified you could make investments a most of Rs 50 lakhs in a monetary yr in these bonds. The NRI should make these investments and present related proof to the Purchaser to make sure TDS is just not deducted from the capital features. The NRI also can declare extra TDS deducted at return submitting and declare a refund.