NRI Guidelines

Tax on income from immovable property selling/renting

The Mere Acquisition Of Property Does Not Attract Income Tax. However, Any Income Accruing From The Ownership Of It, In The Form Of Rent (If It Is Let Out)/Annual Value Of The House (If Is Not Let Out And It Is Not The Only Residential Property Owned By That Person In India) And/Or Capital Gains (Short Term Or Long Term) Arising On The Sale Of This House Or Part Thereof Is Taxable In The Hands Of The Owner.

The Government Of India Has Granted General Permission For NRI To Buy Property In India And They Do Not Have To Pay Any Taxes Even While Acquiring Property In India. However, Taxes Have To Be Paid If They Are Selling This Property. Rental Income Earned Is Taxable In India, And They Will Have To Obtain A PAN And File Return Of Income If They Have Rented This Property. On Sale Of The Property, The Profit On Sale Shall Be Subject To Capital Gains.

If They Have Held The Property For Less Than Or Equal To 2 Years After Taking Actual Possession Then The Gains Would Be Short Term Capital Gains, Which Are To Be Included In Their Total Income As Tax As Per The Normal Slab Rates Shall Be Payable And If The Property Has Been Held For More Then 2 Years Then The Resultant Gain Would Be Long Term Capital Gains Subject To 20% Tax Plus Applicable Cess.

India Has DTAA’s With Several Countries Which Give A Favorable Tax Treatment In Respect Of Certain Heads Of Income. However, In Case Of Sale Of Immovable Property, The DTAA With Most Countries Provide That The Capital Gains Will Be Taxed In The Country Where The Immovable Property Is Situated. Hence, The Non-Resident Will Be Subject To Tax In India On The Capital Gains Which Arise On The Sale Of Immovable Property In India. Letting Of Immovable Property In India. Would Be Taxed In India Under Most Tax Treaties In View Of The Fact That The Property Is Situated In India.

  • Type of asset: Assets like house property, land and building, jewelry, development rights etc. Rate of tax deduction at source (TDS) Long term – 20.6% < Short term – 30.9%.
  • Exemption available (only for long term capital gains) The long term capital gains arising on sale of a residential house can be invested in buying/ constructing another residential house, within the prescribed time. The exemption is restricted to the amount of capital gains or amount invested in new residential house, whichever is lower. If the amount of capital gains is invested in bonds of National Highways Authority of India.
  • (NHAI) or Rural Electrification Corporation, then the entire capital gains is exempted, else the proportionate gain is exempted. As per the financial budget 2007-08, a cap of Rs. 50 lakhs has been imposed on investment that can be made in capital tax saving bonds

In Case The Non-Resident Pays Any Tax On Capital Gains Arising In India, He Would Normally Be Able To Obtain A Tax Credit In Respect Of The Taxes Paid In India In The Home Country, Because The Income In India Would Also Be Included In The Country Of Tax Residence. The Amount Of The Tax Credit As Also The Basis Of Computing The Tax Credit That Can Be Claimed Are Specified In The Respective Country’s DTAA And Is Also Dependent On The Laws Of The Home Country Where The Tax Payer Is A Tax Resident.

An NRI would have to file income tax returns if either of the following conditions are fulfilled :

  • Taxable income in India during the year was above the basic exemption limit OR
  • Earned short-term or long-term capital gains from sale of any investments or assets, even if the gains are less than the basic exemption limit.

Traditionally, you could file your return either by giving a power of attorney to someone in India or by sending your form and documents to a tax expert in India who would then file returns on your behalf.

Though, the easy method for NRIs to file their Income tax returns in India is online filing. There are several options to file online, on the appropriate government sanctioned website.