• Tax on foreigner selling inherited property in India.

Hi
I am a citizen of USA. I am not an overseas citizen of India yet.
My father expired in 2019. He held 2 flats for about 10 years.
Those flats have been transferred in my name only about a month ago in this year, i.e. November, 2020. 
I have 2 sisters in India who have no objection or claim to the flats. In fact, they are willing to help me sell them.
I want to learn 
1) what is the tax in this case that I have to pay on selling the flats, and 
2) any additional tax to repatriate the proceeds to USA, or
 jn case this is too costly then
3) retain the monies in India in my name or may be put in another property, Govt. Bond etc.
Asked 12 months ago in Taxation

7 answers received in 1 day.

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8 Answers

You have to pay long term capital gains on sale of flats as flats have been held by your father for more than 10 years 

 

2) 

Long-term capital gains are taxed at 20%, excluding education cess and surcharge.the buyer is liable to deduct TDS @ 20%. 

 

 

 

3) If you choose to invest these gains in another property, you can claim capital gains tax exemption. Or you can purchase capital gains bonds. In case you decide to invest in a property but are not able to make the purchase by the due date of filing of tax return of the year in which property is sold, you can deposit these gains in a capital gains account scheme, as per the time and manner prescribed.

Ajay Sethi
Advocate, Mumbai
84936 Answers
5617 Consultations

5.0 on 5.0

 

PIOs are allowed to repatriate the sale proceeds of immovable property inherited from a person resident in India given they produce documentary evidence in support of their inheritance and necessary tax clearance certificates from the Income-Tax authority


Capital gains, if any, may be credited to the NRO account from where the NRI/PIO may repatriate an amount up to USD one million, per financial year,

Ajay Sethi
Advocate, Mumbai
84936 Answers
5617 Consultations

5.0 on 5.0

1.When a foreign citizen or a  NRI sells property, the buyer is liable to deduct TDS @ 20%. In case the property has been sold before 2 years(reduced  from the date of purchase) a TDS of 30% shall be applicable.

2. An NRI can sell their residential or commercial property in India that they have bought or inherited to a person resident in India, NRI or a PIO. However, in case of selling agricultural land, plantation property or farm house, the property must be sold to a person who is a resident in India. After the selling comes the repatriation of sale proceeds to the country of residence.

If you are selling the property bought before moving abroad that is while you were a resident of India, then sale proceeds must be credited to the NRO account . You are entitled to repatriate up to USD 1 million including all other capital transactions per financial year (April-March), given you have paid all your tax dues.  Repatriation is restricted to sale of two residential properties only.

You can do this repatriation if you held the property for at least 10 years. If you have kept the property for less than 10 years, you can’t repatriate the money immediately. You need to keep the money in your NRO account till it completes 10 year period and then you can transfer.

3. the NRI should not own more than one house property (besides the new house) and nor should the NRI purchase within a period of 2 years or construct within a period of 3 years any other residential house. Here the entire sale receipt is required to be invested. If the entire sale receipt is invested then the capital gains are fully exempt otherwise the exemption is allowed proportionately.

 

 

T Kalaiselvan
Advocate, Vellore
75050 Answers
1263 Consultations

5.0 on 5.0

An NRI can sell their residential or commercial property in India that they have bought or inherited to a person resident in India, NRI or a PIO. However, in case of selling agricultural land, plantation property or farm house, the property must be sold to a person who is a resident in India. After the selling comes the repatriation of sale proceeds to the country of residence.

If you are selling the property bought before moving abroad that is while you were a resident of India, then sale proceeds must be credited to the NRO account . You are entitled to repatriate up to USD 1 million including all other capital transactions per financial year (April-March), given you have paid all your tax dues.  Repatriation is restricted to sale of two residential properties only.

You can do this repatriation if you held the property for at least 10 years. If you have kept the property for less than 10 years, you can’t repatriate the money immediately. You need to keep the money in your NRO account till it completes 10 year period and then you can transfer.

 

T Kalaiselvan
Advocate, Vellore
75050 Answers
1263 Consultations

5.0 on 5.0

20 percent capital gain tax will be deducted in this case. Repatriation to US upto 1 million with no tax is allowed if the taxes in India are paid by the foreign citizen. 

Prashant Nayak
Advocate, Mumbai
24930 Answers
58 Consultations

4.4 on 5.0

1. Sec 194-IA speaks about TDS on sale of immovable property. Under this section TDS is to be deducted @1% at the time of credit of such sum to the account of the transferor or at the time of payment of such sum whichever is earlier on sale of immovable property.

The transferor or the seller contemplated in this section should be a resident of India. Therefore, this section only deals with sale of property by residents and TDS @1% is to be deducted on such sale by resident seller if the sale consideration of property exceeds Rs. 50 lacs.

2. Section 195 deals with sale consideration  payable to a non-resident Indian which is chargeable to tax. It runs as (1) Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest or any other sum chargeable under the provisions of this Act shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force:

When a Non-resident sells an Immovable property in India, Capital gains income may accrue on such sale to the Non-resident which is chargeable to tax in India. Therefore, the consideration from sale of property in India by a non-resident is chargeable to tax in India and is covered by Section 195 and therefore tax has to be deducted at the time of payment of such consideration.Under Section 112, Long term capital gains on sale of a capital asset is to be taxed at the rate of 20%.

Short-term capital gain on sale of a capital asset (except on sale of equity shares and equity oriented mutual funds) is to be taxed at the slab rates prescribed under the Finance Act applicable to the year of sale.

 

Ashish Davessar
Advocate, Jaipur
30752 Answers
923 Consultations

5.0 on 5.0

In your case its a long term capital gain as the property is 2 years old, so you have to pay 20% of the capital gain whatever of value you sell out in the market though you can claim exemption under section 54 or 54C and 54EC wherein acc. To 54EC if you can invest in bonds of NHAI or REC.

Prerit Goyal
Advocate, Jaipur
13 Answers

Not rated

1. firstly the flats have to be transferred to your name with the consent of your sisters. For that you will need a letter of administration or an heirship certificate. The 2 sisters will have to register release deed in your favour for transferring their share to you. This is how you will get proper title to the flats to enable you to sell them

2. you will have to pay long term capital gains tax 

3. no tax for repatriation of funds from India to the USA. However there must be some limit set by the Reserve Bank of India under FEMA regulations for transferring funds from India

4. in order to save the capital gains tax, you can invest the sale proceeds in a residential house or in approved government bonds

Yusuf Rampurawala
Advocate, Mumbai
6565 Answers
60 Consultations

5.0 on 5.0

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