• Capital gains tax for OCI selling property in India

Hi,

I have couple of questions. i would appreciate if one of you could clarify me in proceeding to selling my flats in India.
1.I bought the building land in 2004 when my nationality was India in my mom's name. then i became a european citizen, my mom gifted that land to me couple of years before for legal reasons, i constructed couple of flats. now i decided to sell one of my flat. i pay my taxes in Europe. my question is, do i have to pay capital gains tax or other taxes to repatriate my earnings from the sale of my property. 

2. i am also planning to sell the flat which is in my father's name where we both have contributed in purchasing this flat in 2006. Do i have to pay any inheritance tax or any other tax if i take my share of my investment towards this property as it is in my father's name who has to transfer my share to my NRO account.
Asked 4 years ago in Property Law
Religion: Hindu

2 answers received in 10 minutes.

Lawyers are available now to answer your questions.

16 Answers

1. Yes the long term capital gain tax has to be paid if you are having the property from more then 3 years and for that on sale only buyer has to deduct a TDS of 20 percent and deposit with the department.

2. There is no inheritance tax in India, further for your share there shall be capital gain tax applicable as above and the TDS has to be deposited from that.

Shubham Jhajharia
Advocate, Ahmedabad
25516 Answers
179 Consultations

5.0 on 5.0

Dear Client,

No concept of inheritance tax except LTCG which shall be Long term & Short term and 20.6% & 30.9 which can be avoided by investing in buying/constructing another residential house, within the prescribed time. For repatriation you may remit an amount up to USD one million, per financial year, out of the balances held in the NRO account.

Mere acquisition of property does not attract income tax whether inherited of gifted or purchased.

Yogendra Singh Rajawat
Advocate, Jaipur
21481 Answers
31 Consultations

4.4 on 5.0

In both the cases you have to pay long term capital gain tax based on the calculation of indexed cost of the property.

You can repatriate the proceeds from your nro account you need to pay any other tax like inherent tax but in case your father is alive then he can gift the property to you.

Vimlesh Prasad Mishra
Advocate, Lucknow
6848 Answers
23 Consultations

4.9 on 5.0

Sale of flat would attract long term capital gains tax

2) you are allowed to remit up to $1 million from the sale proceeds of property in India from their NRO account. ...

3)This limit of USD 1 million is the limit upto which you can repatriate without any permission from RBI. If you have a genuine need to repatriate above this limit, you can make a specific application to RBI for increasing the repatriation limit."

4) As an NRI, you will be subject to a TDS of 20 per cent on the capital gains.

5) the purchaser of the sale proceeds, even if he is an individual will be responsible for deducting tax at source and paying it to the Government. He must get a Tax Deduction Account number (TAN) and issue a TDS certificate for the same."

6) there is no inheritance tax in India

Ajay Sethi
Advocate, Mumbai
87895 Answers
6207 Consultations

5.0 on 5.0

You cannot avoid capital gain tax in India by purchasing any property in any other country

Vimlesh Prasad Mishra
Advocate, Lucknow
6848 Answers
23 Consultations

4.9 on 5.0

Also starting assessment year 2015-16 (or financial year 2014-15) it is mandatory that this new house property must be situated in India. The exemption under section 54 shall not be available for properties bought or constructed outside India to claim this exemption

Ajay Sethi
Advocate, Mumbai
87895 Answers
6207 Consultations

5.0 on 5.0

1. if the property which you intend to sell is situated in India, then any capital gains arising on its sale will be liable to capital gains tax in India only. You cannot claim exemption from the tax in a foreign country.

2. if you release your share in the flat purchased jointly by you and your father in 2006, in your father's favour, against consideration, then too you will have to pay capital gains tax on the consideration amount in India only. Also your father will be required to deduct TDS (tax deducted at source) from the consideration paid by him to you

3. the relevant provision i.e. section 54 of income tax acts merely states that the capital gains accrued on sale of property is to be invested in another residential house within the stipulated period stated therein from date of transfer of old asset. It does not say that the new house is to be necessarily purchased in India only. So I do not see any reason why your claim for exemption should not be allowed by the income tax department if you invest the capital gains in a house in Europe.

4. let me find some case laws on the subject and share here

Yusuf Rampurawala
Advocate, Mumbai
6876 Answers
79 Consultations

5.0 on 5.0

no sir you get the exemption if the amount is invested back in either property or government bonds in India, for OCi further RBI guidelines have to followed to purchase property.

Further you can get the benefit of the capital gains tax in Europe only through the Double taxation Avoidance treaty with the said country.

Shubham Jhajharia
Advocate, Ahmedabad
25516 Answers
179 Consultations

5.0 on 5.0

if you are earning any income in India you need to show the same and pay Indian income tax on it as applicable. If you are an NRI, your foreign income will not be taxed in India.

Mohammed Mujeeb
Advocate, Hyderabad
19029 Answers
32 Consultations

4.5 on 5.0

1) In so far as sale of immovable property by an NRI or OCI is considered, TDS of 23.6% is to be deducted into your PAN No. and Account of the seller, by the buyer/purchaser. Post this you would be eligible to repatriate the money that you receive from sale of this flat.

2) Once again you and along with your father are joint owners of this property, so any income you derive from sale of this property, you will become liable to pay income tax.

Kiran N. Murthy
Advocate, Bangalore
1298 Answers
194 Consultations

5.0 on 5.0

Hello,

Long term capital gain is exempted if you purchase property in India. You cannot claim an exemption on property bought outside India. You can buy a property outside India through the sale proceeds of Indian property after paying LTCG tax.

Regards

Anilesh Tewari
Advocate, New Delhi
17940 Answers
377 Consultations

5.0 on 5.0

1. The gain you have proportionately derived from the flat sold by you after investing thereupon will be considered as your capital gain for which you shall have to pay Capital Gain Tax.

2. Since the property is in the name of your father, he shall have to pay the capital gain tax after selling the said property.

3. It will be beneficial for you if your father shows transfer of your share of investment on the said flat to you as gift for which you won't have to pay any tax.

4. Hope you are aware that you can show periodical renovation of the said flat adding the expenses to the cost of acquiring the flat, index the said cost and then calculate the capital gain to save tax accordingly.

Krishna Kishore Ganguly
Advocate, Kolkata
26602 Answers
726 Consultations

5.0 on 5.0

1. The buyer will deduct TDS from the consideration.

2. You shall have to invest the said amount for purchasing/constructing your dwelling house in India within 2 years to claim back the TDS amount already deducted and deposited by the buyer with the I.Tax department.

Krishna Kishore Ganguly
Advocate, Kolkata
26602 Answers
726 Consultations

5.0 on 5.0

Property shall be purchase in India only and to avoide TDS APPLY for tax excemption certificate.

Yogendra Singh Rajawat
Advocate, Jaipur
21481 Answers
31 Consultations

4.4 on 5.0

For resident Indian seller TDS of 1% is applicable only if the property value is more than 50 lakhs. Now anomaly in this rule is that NRI is liable to pay Capital Gain Tax only on the Capital Gain arising out of sale of the property but unfortunately TDS is deducted on the total Sale Value of the property.

Selling of property by NRI is taxable under u/s 195 of the Income Tax Act, 1961.

Long term capital gain tax will be 22.66% if NRI is selling a property in India after holding it for more than 3 years. In case holding period is less than 3 years then Short Term Capital Gain Tax will be applicable as per income tax slab. In case of short term capital gain, TDS applicable will be 33.99% irrespective of tax slab of the NRI.

Buyer will deposit TDS with Income Tax Department. TDS is applicable even if value of property is less than 50 lakhs.

If your country of residence has Double Taxation Avoidance Agreements (DTAA) with Indian government i.e. lower rate of TDS is allowed. NRI need to submit a tax residency certification from the country of his residence. it will certify that you are a tax paying resident in that country and that tax on this income is paid in that country, it ensure no tax leakage for either countries.

The proceeds of sale of property by your father will remain with him. Officially you are not the joint owner hence the amount your father shall give you after selling the property shall be considered as gift to you.

There is no gift tax to be paid however if you want to repatriate this amount then you may have to comply with the RBI guidelines in this regard.

T Kalaiselvan
Advocate, Vellore
78050 Answers
1543 Consultations

5.0 on 5.0

Can i avoid capital gains tax if i purchase a property in europe with the money that i got from the sale proceedings in India say within two years from the sale. is this allowed. If yes, what should i do for buyer to not deduct TDS.

If your total income in India is less than basic exemption limit of 2.5 Lac: In this case, you can apply for TDS waiver with Income Tax officer under whose jurisdiction your case will fall.

You can claim TDS refund if can show proof of reinvestment of capital gains in India. You can either buy another house in India or invest in capital gains bonds u/c 54EC. You should submit an affidavit stating that you will invest the capital gain amount in capital gain bonds. For property purchase you can produce allotment letter or payment receipts.

Instead of claiming refund which is more tedious process it is always advisable to apply for NIL Tax Deduction / Tax Exemption / Lower Tax Deduction Certificate. It require some intelligent planning before sale of property and proactive approach.

The buyer cannot pay the entire sale consideration amount because he is liable to pay that TDS to government.

You cannot buy a property outside India to claim exemption under section 54 of income tax act.

T Kalaiselvan
Advocate, Vellore
78050 Answers
1543 Consultations

5.0 on 5.0

Ask a Lawyer

Get legal answers from lawyers in 1 hour. It's quick, easy, and anonymous!
  Ask a lawyer