I am an NRI (non-resident Indian) living in Singapore. I bought a property in August 2010 for ₹30 lakh in Noida. I have sold that flat in November 2022 for ₹55 lakh. I want to know how I will be taxed on the sale of the property.
—Name withheld on request
There is no difference between taxation for NRIs on sale of residential property as compared to resident Indians. NRIs who are selling house property which is situated in India have to pay tax on the capital gains.
The tax that is payable on the gains depends on whether it’s a short term or a long term capital gain.
When a house property is sold, after a period of 2 years from the date it was owned— there is a long term capital gain. In case it is held for 2 years or less—there is a short-term capital gain. Tax implications for NRIs are also applicable in the case of inheritance.
In case the property has been inherited, remember to consider the date of purchase of the original owner for calculating whether it’s a long term or a short term capital gain. In such a case the cost of the property shall be the cost to the previous owner.
Long term capital gains are taxed at 20% and short term gains shall be taxed at the applicable income tax slab rates for the NRI based on the total income which is taxable in India for the NRI.
Tax deducted at source (TDS)
When an NRI sells property, the buyer is liable to deduct TDS @ 20%. In case the property has been sold before 2 years(reduced from the date of purchase) a TDS of 30% shall be applicable.
NRIs can claim exemptions under Section 54, Section 54 EC, and Section 54F on long-term capital gains.
Therefore, an NRI can take benefit of the exemptions from capital gains when filing a return and claim a refund of TDS deducted on capital gains.
Exemption under Section 54 is available on long-term capital gains on the sale of a house property. The exemption is also available under Section 54EC when capital gains from the first property sale are reinvested into specific bonds.
Archit Gupta is founder and chief executive officer, Clear.in.
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