Tax rules NRIs must know when selling property in India

Open House, a consumer forum by Magicbricks, is a regular medium that addresses buyer’s and seller’s doubts and queries. Eminent panels of experts who have in-depth knowledge about the real estate industry, tax regulations and legal nuances in property deals provide advice to reader’s queries.

With the proposed changes in the income tax laws by the Finance Minister, Arun Jaitley in his first Budget, Open House has been receiving many queries on the same, property sale, payment of taxes post sale of apartment in Mumbai, etc. Magicbricks gathered a list of questions and our expert’s answers which will benefit you if you intend to sell property in India.

 “I am planning to sell an apartment in Mumbai.  What will be the tax amount and how should I pay tax in India? Should I deposit the amount in NRE or NRO account? How can I transfer the amount in my US account?” – Rahul Gupta

As per Magicbricks Tax expert Vaibhav Sankla director, H&R Block (India) Private Limited, opined that in case the property has been held for more than three years, the capital gains are classified as a long-term one. This means capital gains tax at the rate of 20 per cent after indexation becomes applicable.

Sankla capsulated some basic rules that need to be adhered to while buying or selling property in India.

  • Tax Deducted at Source (TDS) needs to be paid when the value of the immovable property exceeds Rs 50 lakh

 

  • The buyer must ensure that they deduct the TDS from the amount paid for the property. Proof of the tax paid must be given at the time of registration of property

 

  • Those buying property from NRIs need to factor in this TDS amount or else they may have to pay it themselves, in case the seller leaves the country

 

  • A TDS receipt is issued for those who have a Tax Deduction Account Number (TAN). So, essentially the party will have to apply for and get a TAN from the tax department, they can then issue a TDS receipt to the owner of the withheld TDS

 

  • NRIs selling property in India should ensure they get a TDS receipt. In case, the buyer fails to deposit the TDS deducted with the Indian tax authorities, having a TDS receipt will be proof enough for the NRI regarding the tax payment

 

  • NRIs need to pay 20 per cent for long term capital gains when selling immovable property in India. Indexation will bring the capital gains amount down if the property has been held for a longer time

 

  • Money from the sale of property in India by NRIs cannot be deposited in NRE accounts. Hence, the only option is to deposit the amount in the Non-Resident Ordinary (NRO) account. Transfer of any amount can be made to the NRO account subject to applicable rules like the CA certificate confirming taxes paid, with proof that the money being transferred is only from the sale of the said property in India

Source: Times of India / Magicbricks
Kanchana Dwarakanath is an integrated communications professional with diverse experience in journalism & Marketing Communications. Her current focus areas include real estate, infrastructure, urban management and the skill development market.