Capital Gain on sale of Immovable Property in India by NRI
Tax incidence and scope of taxable income depends on the residential status of a person in India. In case of NRI, all income arised or accrued in India during the previous year (i.e. Financial year) is chargeable to income tax in India and liable for TDS deduction. Sale of immovable property by NRI is chargeable to tax under the head Capital Gain.
Calculation of Capital Gain
Capital gain depends on the type of capital gain i.e. long term capital gain or short term capital gain. If the property is sold after holding it for more than 2 years then it is a long term capital gain otherwise it is a short term capital gain.
Long term capital gain is calculated after deducting indexed cost of acquisition from the net sale consideration.
Short term capital gain is arrived by deducting cost of acquisition from the net sale consideration. There is no benefit of indexation available in case of short term capital gain.
Meaning of Net Sale Consideration
Total sale consideration as per the sale deed less transfer expenses. Transfer expenses include brokerage or commission paid, travelling expenses incurred in connection with the transfer. It depends on facts of each case.
Transfer expenses should be incurred wholly and exclusively in connection with transfer of capital asset. Total sale consideration and transfer expenses may be subject to scrutiny by the AO.
Also Read: Income Tax on F&O and Intraday Trading
Rate of Capital Gain Tax
Long term capital gain is subject to special rate of tax @ 20%. Applicability of surcharge depends on the total income of an individual. Cess@ 4% is also applicable on tax and surcharge.
Short Term capital gain is subject to tax at normal slab rates. In both the cases, benefit of deduction u/s VI-A is not available. Benefit of exemption limit is available.
Section 195 and NIL or lower TDS certificate
Buyer is liable to deduct TDS at the rates mentioned above on the sum payable (i.e. Sale consideration) to the seller. Seller may apply for NIL or lower TDS deduction certificate by filing Form 13 to the jurisdictional Assessing officer (AO). Form 13 may be applied either online or offline.
Buyer is liable to deduct TDS on the basis of lower TDS deduction certificate and file TDS return in the Form 27Q quarterly. After filing of TDS return, buyer will issue TDS certificate to the NRI. Seller can remit the proceeds outside India by filing Form 15CA.
Also Read: Income Tax Old tax rates vs New tax rates – Section 115BAC
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