Tax and regulations relating to the selling of house property in India are different for NRIs as compared to that of an Indian resident.
Whom to sell to?
First of all, NRIs can’t sell their agricultural land, plantation property or farmhouse to another NRI or Person of Indian Origin (PIO). However, residential or commercial properties can be sold to a person residing in India, another NRI or a PIO.
How much tax is payable?
NRIs have to pay taxes on the capital gains made from selling their house property. If they sell their property within two years of its date of purchase, Short-Term Capital Gain tax (STCG) rates are applicable. STCG rate is as per the applicable income tax slab rate of the NRI based on his taxable income in India, and if they sell it after two years, Long-Term Capital Gains (LTCG) taxes at 20% become applicable.
If an NRI has an inherited property, the cost of property for the previous owner becomes the basis for the calculation of capital gains taxes.
What about Tax Deducted at Source (TDS)?
When an NRI sells their property, the buyer should mandatorily deduct TDS at 20%. In case the property has been sold before 2 years, a TDS of 30% shall be applicable.
How can we save tax on capital gains?
NRIs can claim exemptions on the basis of section 54 and section 54 EC on LTCG of house property in India.
Invest in bonds
NRIs can invest their capital gains into bonds issued by National Highway Authority of India (NHAI) or Rural Electrification Corporation (REC) which could be redeemed after five years. However, there is a maximum limit of Rs 50 lakh. In order to claim exemption, you have to invest within six months of the sale of property and before the return filing date.
Source: Taxguru, Scripbox
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