The tax implications in case of sale of residential property in India by a non-resident is same as that for a resident particular person i.e. capital build, if any, will appeal to tax in India.
Regarded as one of many general issues for a non-resident who intends to promote his / her residential property in India is regarding the tax implications on such sale in India.
The tax implications in case of sale of residential property in India by a non-resident is same as that for a resident particular person i.e. capital build, if any, will appeal to tax in India.
What differentiates the tax rate is the length for which the property has been held. If the property is held for more than 2 years, it is handled as a prolonged-time length capital asset and the build is believed of as to be prolonged-time length in nature which is taxable at 20% (plus applicable surcharge and cess). If the property is held for as much as 2 years, it becomes a immediate capital asset and the build is believed of as to be transient which is taxable at vendor’s applicable tax charges.
The length of holding also determines how the capital build is to be computed. In case of transient capital asset, capital build is computed as the variation of sale consideration (catch of costs incurred wholly and completely in connection with transfer of the capital asset); and rate of acquisition & rate of development.
While in case of sale of prolonged-time length capital asset, the associated rate of acquisition and development are adjusted for inflation the utilization of the inflation index as notified by the Central Executive (CII) every yr and the build is accordingly particular.
Scheme shut an instance of Mr. X, who is a Non Resident of India and has taxable revenue of Rs 75 lakh in India in some unspecified time in the future of the FY 2021-22. He’s planning to promote his residential property in Delhi which he purchased in 2005 for Rs 1.2 crores. The sale consideration agreed with Mr. Y is Rs 3.4 crores. Assuming the capital build is Rs 40 lakhs (as the associated rate is inflated the utilization of CII), he will must pay tax at 22.88% (20% tax rate plus 10% surcharge plus 4% cess) on the talked about capital build of Rs 40 lakh.
While the taxability in India is similar for both resident and non-resident, the withholding tax provisions fluctuate for a non-resident. For a non-resident vendor, tax is required to be deducted at provide at 20% (plus applicable surcharge and cess) in case of sale of prolonged-time length property and at 30% (plus applicable surcharge and cess) in case of sale of transient property.
There might perchance presumably honest arise a purposeful conducting for the vendor the do the tax incidence on capital build is decrease consequently of availability of lift-forward loss, assorted most modern yr capital loss and many others. In such a case, there is a provision beneath the Indian tax regulations the do the vendor can put together for a decrease rate or Nil tax withholding certificates from his / her jurisdictional tax officer online by submitting a originate, Earn 13.
There are also some exemptions available beneath the Indian tax regulations in case sale of property finally ends up in a prolonged-time length capital build. The tax burden on such prolonged-time length build is also reduced by investing in specified sources admire one other residential property and / or specified bonds admire NHAI, REC and many others as per the prescribed stipulations and timelines.
On the assorted hand, if the sale of property finally ends up in a capital loss, such loss (transient / prolonged-time length) cannot be offset with assorted revenue.
Short-time length capital loss is also location off in opposition to any assorted build (transient / prolonged-time length). On the assorted hand, prolonged-time length capital loss can ideally suited be location off ideally suited in opposition to assorted prolonged-time length capital gains. The stability loss is carried forward to following 8 financial years and is also location-off in the same manner. To claim lift-forward of losses, the tax return needs to be filed internal the prescribed slash-off dates.
So, earlier than making the bittersweet (typically) resolution of marketing their house in India, the non-residents might perchance presumably honest wish to utilize into consideration the tax implications on such sale and how simplest to deal with watch over that.
(The creator is Tax Companion and Nationwide Leader – Of us Advisory Companies and products, EY India. Aanchal S Gupta, Senior tax reliable with EY has also contributed to this text. The views expressed are personal)
Sonu Iyer is Tax Companion and Nationwide Leader – Of us Advisory Companies and products, EY India.
