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NRIs should take advantage of lower TDS while selling property in India

Moreover, investing capital gains in bonds will not attract any TDS at all

Yogini Joglekar  |  Mumbai 

Being an at this point in time must a great spot to be in. And specially for NRIs who wish to make in India as well as for those who want to sell made some time ago.

According to consultants, Indian metro cities are seeing a good 20 to 30% year-on-year increase in sales from NRIs in the past 4 to 6 months. This is on the back of a constant rise in prices in the metro cities.

According to data from Residex, the residential index of National Housing Bank, prices in Mumbai and Delhi have shot up by 17 and 20% between March 2012 and March 2013. While many NRIs are still mulling and some even selling their properties, it’s important they know how they will be taxed on such a transaction.

If a resident Indian or a Non-Resident Indian (NRI) sells a in India after holding it for a period of more than three years, then long term capital gains tax of 22.66% will be applicable.

While the taxation is same for both the parties, there is a difference in the way Tax-Deducted at Source (TDS) is calculated.

Anil Harish, of DM Harish & Co. says, “An selling in India has the right to apply to the assessing officer for certificate of non-deduction or lower tax deduction. That is for deducting his only on the capital gains.”

He can make this application because if the 20.66% is applied on the sale price, then the may end up getting less than what he had invested.

In other words, the including surcharge of 22.66% will be calculated only on the capital gains and not on the sale price which will not erode his profits, if any. If this gets approved by the Income Tax office, then the buyer of the NRI’s can make payment to him in full (ie: sale price), whereas a certificate of (on capital gains) will be issued separately to the

This procedure takes about 2 to 4 weeks, and will require the to submit some key documents like his sale-agreement, PAN, income tax returns, bank statements and so on. Hence, hiring a chartered accountant or a lawyer in India would work in his benefit to ensure a smoother transaction.

First, deduct the expenses incurred by from the sale price, which will give you the net selling price of the Expenses incurred can include legal fees, transfer fees, traveling fees etc. Then, the difference between this and the indexed cost of purchase will be your capital gains.

However, as an you can save this as well.

One way of getting this waiver is if the re-invests these capital gains made from the sale of in another (within two years) or in tax-free bonds (within six months). In such cases, the will be exempt from tax in India, and no will be deducted either. For this, they will have to apply for a tax-exemption certificate under Section 195 of income tax act.

Whereas, if the decides to sell that within three years, then he will have to pay short-term capital gains tax according to the tax-bracket he falls under along with a fixed rate of respectively.

As an NRI, he can ask his CA to file form 15 CA & CB electronically which will state that the has no tax-liability and can remit this money back to his country now. If he doesn’t wish to repatriate the money, he can keep it in his Indian bank’s NRO account. However, according to RBI guidelines repatriation of such funds per financial year should not exceed $1 million.

First Published: Tue, September 10 2013. 09:46 IST