Are you a non-resident Indian who is planning to sell his/her property in India? Will you have to TDS (Tax Deducted at Source)? There may be several questions floating around in your mind regarding this aspect. Here’s a guide towards TDS in case of such transactions.
When it comes to taxation on the sale of immovable property in India, taxes will be levied on the year in which the property is sold. Any immovable property which is held for more than 24 months in India is taken as a long-term capital asset and as a result, the taxable capital gain will be the proceeds from the sale minus the indexed cost of acquisition (which will be adjusted based on the CII or cost of inflation index) and also minus the costs of improvement and costs of transfer.
LTCG (Long-Term Capital Gains) can be taxed at 20% + surcharge in case that applies along with education cess. Short-term capital gains are worked out as the difference between the acquisition costs and sales proceeds (indexation benefits are not available) as per the rates of respective slabs.
The LTCG can be claimed as exempted from taxes to the extent of which you re-invest the same in a residential property:
- Bought within a year prior to the transfer date
- Bought 2 years after the transfer date
- Built within 3 years after the transfer date
The exception only applies in case a residential house is bought and constructed in India, which is something you will have to keep in mind. There are some other options that are available when it comes to claiming LTCG as exemption from your taxes. This can be claimed as exemption to the extent which you reinvest it in particular bonds in India itself. However, there are some restrictions on the investment quantum that is made across bonds. In case you do not invest the LTCG till the due date for tax returns filing or 31st July, you may keep the capital gain amount in a specified Capital Gain Account Scheme (CGAS) with any bank (however this should not be after the due date for filing your returns) and thereafter withdraw the amount for reinvesting it in India.
In case the full amount is not reinvested or even deposited in the CGAS, the portion of the gain, which remains, will always be taxable. The taxes can be before filing returns in tandem with interest by the 31st of July. You can also pay this as an advance tax in four installments (15%, 45%, 75% and 100% by 15th June, 15th September, 15th December and 15th March respectively).
In case of TDS on the sale of immovable property, any payment that you make to an NRI will attract TDS under the income-tax laws in the country. This is applicable in case this payment is chargeable in respect of taxes in India. The buyer will then deduct the TDS at the rate of 20% for LTCG or in case of short-term capital gains, at 30%. You can also submit an application for TDS at reduced rate or Nil order from the income-tax officer who will issue a certificate upon your application which states that TDS at reduced rate or Nil TDS will apply on the transaction in question.