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Non-resident Indians share a vital role in the economic development of our country.  Our foreign exchange reserves have been increasing since LPG era thanks to Non- resident Indians.  To sell property/house property in India, we have to adhere some rules and regulations. Non- resident Indians are not an exception to that. Therefore, they have to understand the following points:-

(1) If a NRI cannot come to India, then he can appoint a power of Attorney as his agent to sell his/her house property in India. Otherwise, a NRI may visit India and sells his properties by obeying the Indian Registration Act and the Indian stamp Act.

(2) If a Non-resident Indian sells a house property (owned by him/her for at least two years), he has to pay 20% of the gain as long- term capital gain tax.

(3) If a Non-resident Indian sells a house property [owned by him/her for a period not exceeding two years], he has to pay short-term capital gain .The short-term capital will be the same tax rate which is applicable to the other Incomes of  the NRI. Following are the Income tax rates applicable to an individual.

(A) 5%     (B) 20%   (C) 30%

If the  NRI opts sec 115 BAC , following will be Income tax rates

i. 5%

ii. 10%

iii. 15%

iv. 20%

v. 25%

vi. 30%

(4) If the property is an inherited one, period of holding will be computed from the date on which it has been acquired by the previous owner. Then, either short-term capital gain or long-term capital gain will arise.

Example I:

I. A NRI purchases a property on 01/04/2006 for Rs 10,00,000  in Thrissur(Kerala)  and he sells his property on 01/10/2021  for 100,00,000. In that the Income Tax liability of the NRI can be calculated as follows:

Sales Consideration   ———– Rs.1,00,00,000
Less: Indexed Cost of Acquisition (10,00,000*301/122 ) 24,67,213
Long –term Capital Gain 75, 327,87
Tax on Long –term Capital Gain 15,06,557
Add: Surcharge @10% 1,50,656
Add: Health and Education Cess@4% 66289
Total tax Liability 17,23,502

Example II

I.A NRI purchases a property on 01/04/2006 for Rs 50,00,000 in Thrissur and he sells his property on 01/10/2021 for 100,00,000. In that the Income Tax liability of the NRI can be calculated as follows:

Sales Consideration   ———– Rs.1,00,00,000
Less: Indexed Cost of Acquisition (50,00,000*301/122 ) 1,233,60,66
Long –term Capital Gain 23,36,066

Under the above circumstances, the ,NRI has no liability to pay the taxes.

(5) A NRI, who has not come to India in the previous year, is liable to be taxed as resident but not ordinary resident if his Income in the relevant previous year exceeds Rs. 15 lakhs.

Precautions to be taken by Non-resident Indians while disposing their house property in India

(6) TAN number is a mandatory document to purchase house property in India. Therefore, the buyer has to apply for the TAN number.  Otherwise, he /she cannot deduct TPS and remit in the government account.

Following is the amount of TDS which is to be deducted

Long-term capital gain

[1] 20% (Income tax) + 10% or 15% surcharge + health and education Cess@ 4%

Short-term capital gain

5% or 20% or 3% (Income tax) + surcharge +health and education Cess @4% .

[7] As per sec 195, the buyer cannot give the amount to the NRI without deducting the TDS. The NRI should submit certificate of Lower deduction of TDS received from the Income Tax Department. On the basis that certificate, the buyer will deduct the TDS. If the seller cannot produce a certificate from the Income Tax Department, then the buyer will deduct TDS on the basis of total sales price instead of capital gain.

[8] The NRI should submit certificate received from the Income-tax department.  On the basis of that certificate, the buyer will be deduct TDS.

[9] .A NRI can claim the deductions under the following sections

(1) sec 54

(2)sec 54 EC

(3) sec 54 F

A. Sec 54

a. A new residential house property is to be acquired within two years from the date of sale of existing residential house property or A new residential house property was acquired before one year from the date of sale of existing residential house property .If the assesse wants to construct a new residential house property, it will be constructed within three years. If the long term capital gain is not more than 2 crores, maximum 2 houses can be bought or constructed

Least of the following amount is the eligible as exemption as per sec 54.

Long term capital gain or the cost of new house/amount deposited in the capital gains account scheme.

b. Assessee do not transfer the newly bought residential house property and he/she violates this condition, he/she will lose the already claimed deduction as per sec 54.

c. If the assesse cannot use the entire amount till 31 July 2022, the assesse has to invest the unutilized amount in the capital gains account scheme as per the capital gains account scheme of 1988. He/she will have to deposit the amount in either deposit A or deposit B of recognized public sector banks. Interest, nomination and withdrawal facility are available to those accounts .But you cannot use it as security .Besides, you have to use the amount within 60 days of withdrawal for the purposes mentioned in sec 54.Otherwise ,you have to pay the income tax

d. Capital gains account scheme is a temporary arrangement.

B. Sec 54 EC

Deduction under the above section can be claimed by a NRI who invests the amount of long term capital gain in the specified bonds of the following institutions.

i. The National Highways Authority of India

ii. The Rural Electrification Corporation Ltd

iii. The Power Finance Corporation Ltd

iv. The Indian Railway Finance Corporation Ltd

Sec 54 F

Deduction under the above section can be claimed by a NRI who invests the amount of long term capital gain on investment of the consideration in residential house

[10] Besides, the buyer of the house property has to obey FEMA rules and regulations to remit the amount to abroad with respect to the above transactions.

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