Do you know that you’ve to pay tax if you want to sell or purchase property in India from abroad?

Yes, you have to pay. Before taking any such step, you should know the property investment taxation laws for NRIs. Otherwise, your taxable money would mount a lot.

To get rid of such awkward situation, you should know the taxation policy for the non-residents in India. This blog is written with a view to make acknowledged to you of Indian tax norms. The below mentioned guidelines are strictly meant for selling and purchasing of property of expats with Indian passport.

Let’s begin.

Taxation law if an NRI sells a property:

The selling procedure of any property will be similar for domestic as well as PIOs/NRIs. The amount received from the sale of the property would be taxable. Now, the question arises-will it be taken as a long term capital gain or a short term gain?

• Difference between long term and short term capital gain:

Answer-The gain received from the sale of the property would be considered a capital gain. To distinguish whether it is the long term or the short term gain, you should count the number of years from when you purchased it. If you sell it after 2 years or more of its purchase, it would be the long term capital gain. But, if that selling time is less than the said timeframe from its purchasing date, it would be the short term capital gain.

• Taxability:

Your gain would undergo for TDS deduction. The Indian living overseas would be subjected to pay 20% TDS if it’s the long term capital gain. The TDS value will scroll up to 30% if it’s the short term capital gain. Therefore, the NRIs should invest in Indian property while keeping these tax implications.

• Repatriation:

If you think of repatriation, you can go for it. But, you can repatriate upto $1 million in a financial year. You should have a PAN card. Quote it in the challan-cum-statement in a Form 26QB. This form discloses that you deposit withhold tax.

If you have any doubt or confusion, dispel it with an advocate who deals in the NRI’s property management cases.

Taxation law if the NRI sells an inherited property:   

It’s true that non-residents can’t invest in immovable property. But, this law becomes null and void when it comes to inherited or gifted property. You can sell it willingly.

• Capital gain:

The capital gain will be computed on the gain on the sale of the property. It will be similar to, as if that property is yours. Therefore, the cost of acquisition would be same for you as of the owner. The cost of indexing should be calculated from the year of purchase by the original property owner.

Capital gain=Sale proceeds-indexed cost of acquisition

If you sell it less than two years from holding that property, it would be short term capital gain. Otherwise, it would be long term capital gain.

• Taxability:

After determining the capital gain, you would have to evaluate tax value. If it’s a long term capital gain, the tax would be 20% of the gain. When it comes to the short term capital gain, you should integrate it with your income. And then, you should calculate the tax amount. It differs financial year to financial year. So, you can check the income tax slab for deriving that value.

• TDS:

If you want to save your tax, you should show the TDS deduction with the buyer. If it’s a long term capital gain, 20% TDS will be deducted, otherwise, it would be 30%. You should report about it in your country of residence.

• Tax Exemption:

You can get off paying tax amount. Show zero TDS to the income tax officer.