Selling a property in India
7 months ago
My son is an NRI in USA. He is selling a property in India. What are the tax implications like TDS/Capital gains/exemptions etc?
A.Dear Client,
1. TDS (Tax Deducted at Source): When an NRI sells property in India, TDS may be applicable on the sale proceeds. The buyer is responsible for deducting TDS at the prescribed rate and depositing it with the income tax department. The current TDS rate is 20% (plus applicable surcharge and cess) on the long-term capital gains. However, if the property being sold is agricultural land, the TDS rate is typically 1%.
2. Capital Gains: The sale of property in India could attract capital gains tax. The tax liability depends on whether the property is held as a long-term asset or a short-term asset. If the property is held for less than two years, it is considered a short-term capital asset, and the gains are taxed at the applicable slab rate. If the property is held for two years or more, it is considered a long-term capital asset, and the tax liability would depend on whether the property is a residential or non-residential property.
- For residential property: The long-term capital gains can be calculated by deducting the indexed cost of acquisition from the sale value. The current tax rate for long-term capital gains on residential property is 20% (plus applicable surcharge and cess). However, your son may be eligible for exemptions or deductions under Sections 54, 54F, or 54EC of the Income Tax Act, which can help reduce the tax liability if certain conditions are met.
- For non-residential property: The long-term capital gains are taxed at a flat rate of 20% (plus applicable surcharge and cess), with indexation benefit available.
3. Exemptions: As mentioned earlier, certain exemptions or deductions may be available under the Income Tax Act to reduce the tax liability of an NRI selling a property in India. For example, if the sale proceeds are reinvested in another residential property within a certain period or invested in specified bonds, your son may be eligible for exemptions under Sections 54 and 54EC, respectively, subject to certain conditions.
It is important to comply with the necessary reporting requirements and timelines specified under the income tax laws, such as filing an income tax return, disclosing the sale of property, and claiming any applicable exemptions or deductions.
Thank you.
1. TDS (Tax Deducted at Source): When an NRI sells property in India, TDS may be applicable on the sale proceeds. The buyer is responsible for deducting TDS at the prescribed rate and depositing it with the income tax department. The current TDS rate is 20% (plus applicable surcharge and cess) on the long-term capital gains. However, if the property being sold is agricultural land, the TDS rate is typically 1%.
2. Capital Gains: The sale of property in India could attract capital gains tax. The tax liability depends on whether the property is held as a long-term asset or a short-term asset. If the property is held for less than two years, it is considered a short-term capital asset, and the gains are taxed at the applicable slab rate. If the property is held for two years or more, it is considered a long-term capital asset, and the tax liability would depend on whether the property is a residential or non-residential property.
- For residential property: The long-term capital gains can be calculated by deducting the indexed cost of acquisition from the sale value. The current tax rate for long-term capital gains on residential property is 20% (plus applicable surcharge and cess). However, your son may be eligible for exemptions or deductions under Sections 54, 54F, or 54EC of the Income Tax Act, which can help reduce the tax liability if certain conditions are met.
- For non-residential property: The long-term capital gains are taxed at a flat rate of 20% (plus applicable surcharge and cess), with indexation benefit available.
3. Exemptions: As mentioned earlier, certain exemptions or deductions may be available under the Income Tax Act to reduce the tax liability of an NRI selling a property in India. For example, if the sale proceeds are reinvested in another residential property within a certain period or invested in specified bonds, your son may be eligible for exemptions under Sections 54 and 54EC, respectively, subject to certain conditions.
It is important to comply with the necessary reporting requirements and timelines specified under the income tax laws, such as filing an income tax return, disclosing the sale of property, and claiming any applicable exemptions or deductions.
Thank you.
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