Are you an NRI contemplating selling property in India?
Selling property in India as a Non-Resident Indian (NRI) involves navigating through various tax implications and procedures. This comprehensive guide aims to shed light on the taxation of capital gains, TDS deduction, and strategies for tax-saving.
Taxation of Capital Gains:
NRIs selling house property in India are subject to capital gains tax. Long-term gains, realized after 2 years of ownership, incur a 20% tax, while short-term gains are taxed according to applicable income tax slab rates.
Consideration for Inherited Property:
Inherited property sale dates back to the original owner’s possession to determine long or short-term gains. The property cost is calculated based on the previous owner’s acquisition price.
Tax-saving Strategies:
NRIs can claim exemptions under sections 54 and 54EC to mitigate tax liabilities. Section 54 enables reinvestment of gains in a new property, subject to specific conditions. Similarly, Section 54EC offers exemptions for investments in specified bonds.
TDS Deductions:
Buyers must deduct TDS at 20% (or 30% for properties sold within 2 years of purchase) when transferring sale proceeds to NRIs. Buyers are mandated to obtain a Tax Deduction Account Number (TAN) and deposit the deducted TDS amount with the Income Tax Department.
Mitigating TDS Liabilities:
NRIs can obtain NIL/lower deduction certificates from the Income Tax Department to reduce TDS rates. Failure to deduct TDS or underreporting can lead to penalties and legal consequences.
Repatriation of Sale Proceeds:
To repatriate sale proceeds abroad, NRIs must submit Form 15CA and 15CB, with the latter signed by a chartered accountant. There’s a yearly cap of USD 1 million for repatriation.
FAQs:
- Are NRIs liable to pay capital gains tax on property sales in India? Yes, NRIs must pay capital gains tax on property sales, with rates varying based on the duration of ownership.
- Can NRIs claim exemptions on capital gains tax? NRIs can avail exemptions under sections 54 and 54EC by reinvesting gains in specified avenues like new properties or bonds.
- What is the role of TDS in property sales by NRIs? TDS must be deducted by buyers at the time of transferring sale proceeds to NRIs, with rates specified by the Income Tax Department.
- How can NRIs reduce TDS liabilities? NRIs can apply for NIL/lower deduction certificates to lower TDS rates, ensuring compliance with tax regulations.
- What are the repatriation rules for NRIs selling property in India? NRIs can repatriate sale proceeds abroad by submitting Form 15CA and 15CB, subject to a yearly cap of USD 1 million.
Understanding the tax implications and compliance requirements is essential for NRIs looking to sell property in India. Consultation with tax experts can provide personalized guidance based on individual circumstances.
#NRIProperty #Taxation #TDS #RealEstateInvesting #15ca #15CB #Foreignremittance #canatasha #cainbhopal
