As per Finance Act, 2020, there is an amendment in Section 6 of the Income tax Act, 1961, for determining the residential status of an individual.

An individual, who is citizen of India, is said to be Non Resident if he doesn’t satisfy any of the below conditions:

  • He is in India for a period of 182 days or more in the financial year

OR

  • He is in India for 60 days or more during that financial year and has been in India for 365 days or more during 4 previous years immediately preceding the relevant financial year.

After an amendment in Budget 2020, where the Total taxable income of such individual in India exceeds Rs.15,00, 000,  the reduced period of 120 days shall be applied, which means that he will be considered as Non Resident Indian if his period of stay is less than 120 days and Indian taxable Income is more than rs.15,00 ,000/-

And if his income (Taxable Indian Income) is less than or up to Rs.15, 00,000 during the financial year will continue to remain NRI, if the stay does not exceed 181 days, as was the case earlier.

The following types of Income are taxable in the hands of Non Resident Indian:   

S.no. Particulars Taxable to Non-Resident Indian
1. Income received or deemed to be received in India whether earned in India or elsewhere Yes
2. Income which accrue or arise or is deemed to accrue or arise in India during the previous year, whether received in India or elsewhere Yes
3. Income which accrue or arise outside India and received outside India from a business controlled from India No
4. Income which accrue or arise outside India and received outside India in the previous year from any other source No
5. Income which accrues or arises outside India and received outside India during the year preceding the year and remitted to India during the previous year No

Now, if a Capital Gain is accrued or received to Non Resident in India then it would be taxable in his hands.

For example, if an Individual who is citizen of India, has house property in India and he permanently moved out of India, being an NRI, he sold his house property situated in India. The sale proceeds from that house property after deducting Cost of Acquisition shall be taxable in the hands of NRI as covered in point 1 above that any income received in India shall be taxable in the hands of NRI.

However, capital gains from the sale of house property can be claimed as an exemption from tax if the amount is invested:

Section 54: Exemption on sale of House Property on Purchase of another House Property:

When the capital gain on house property is invested to purchase any other house property in India or constructed house property, then exemption shall be limit to the capital gain on sale (if the purchase of house property is higher than the amount of capital gain). The exemption on two house properties will be allowed once in a lifetime of a taxpayer, provided the capital gain do not exceed Rs.2 crores.

Conditions for availing this benefit:

1. The new property can be purchased either in 1 year before the sale or 2 years after the sale of the property.

2. The gains can also be invested in the construction of a property, but construction must be completed within three years from the date of sale.

3. This exemption can be taken back if this new property is sold within 3 years of its purchase/completion of construction.

Section 54EC: Exemption on Sale of House Property on Reinvesting in Specific Bonds

  • One can invest them in bonds for up to Rs. 50 lakhs issued by National Highway Authority of India (NHAI) or Rural Electrification Corporation (REC).
  • The money invested can be redeemed after 5 years, but they cannot be sold before the lapse of 5 years from the date of sale.

Section 54GB: Exemption of Capital gain arising from a long term capital assets being a ‘residential property’, if the amount is invested in subscription of equity shares of the eligible company.    

Computation of Long Term Capital Gain

Particulars Amount
Sales Consideration XXXXX
Less: Brokerage/Commission (XXX)
Less: Indexed Cost of Acquisition (XXXX)
Less: Indexed Cost of Improvement (XXXX)
Exemptions provided u/s 54F,54EC, 54GB (XXXX)
Long term Capital Gain XXXXX

Tax implication:

If it is a long term capital gain: taxed @ 20% of LTCG

If it is short term capital gain: Normal Tax slab rates of an Individual

Author Bio

Qualification: CA in Practice
Company: Kratika Maheshwari & Co
Location: Hyderabad, Andhra Pradesh, IN
Member Since: 05 May 2020 | Total Posts: 3
I am Chartered Accountant doing practice and having an experience of 3 years in the field of Auditing and Taxation. View Full Profile

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