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I am a NRI and PIO. On December 15, I purchased two residential properties, which were paid for through my NRE account. What are the tax implications when I sell these properties? How can I remit the money outside India in foreign exchange (dollars)? What is the rate at which I would be taxed on capital gains?
Profits on the sale or transfer of land and buildings, whether residential or commercial, are treated as long-term capital gains if sold after 24 months. The profits are treated as short-term capital gains if the same is sold within 24 months. The short-term capital gains are taxed at the slab rate applicable to the taxpayer. The long-term capital gains are taxed at a flat rate of 12.50% without any indexation benefits, as the budget presented on 23 July 2024 has withdrawn the indexation benefits.
There are no differences as regards taxation of short-term and long-term capital gains on the sale of land and building between a resident and a non-resident except that a resident individual has the option to pay tax either @ t 12.50% on plain long-term capital gains or @20% on indexed long term capital gains if the property was acquired before 23 rd July 2024. There is one more difference between a resident and a non-resident taxpayer.
If his income other than long-term capital gains and short-term capital gains on listed shares and equity-oriented schemes is below the exemption limit, a resident individual can offset such shortfall against such capital gains and pay tax on the balance of capital gains. This facility to offset the shortfall in the basic exemption limit is not available to non-resident taxpayers.
You can save long-term capital gains by investing the plain capital gains either in a residential house in India or by investing the long-term capital gains in capital gains bonds.
A non-resident is allowed to remit up to 10 Lakh USD every year without obtaining any specific permission from the RBI. Additionally, a non-resident is allowed to repatriate the sale proceeds of up to two residential properties. The amount allowed to be repatriated should not exceed the amount paid for the property’s acquisition by remittance from outside India or from an NRE or FCNR account. Any home loan serviced from these sources would qualify for such remittance.
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Balwant Jain is a tax and investment expert and can be reached on jainbalwant@gmail.com and @jainbalwant his X handle.
Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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