527. New Tax rules when selling property in India . . . TDS on sale of property
Questions: Sir, Read your blog and found very helpful. I am planning to sell apartment in Mumbai and had few questions. Background : bought the flat in 1988 @ Rs. 2,00,000. Current sale price is eta. Rs. 50,00,000 What will be and how to pay tax in India. Recently spent Rs. 2,00,000 on renovation and 1000 is society monthly.Any reference of CA - Lawyers (if required ) you can provide.Should I deposit the money in NRE or NRO Account. ( required to be maintained for old parents)How to transfer the amount in my US account. What will be taxes in US I will have to pay. ShekhaAnswer: Regarding your questions as to what your tax would be and how to pay tax in India: As the property you plan to sell has been held for more than three years, your capital gain is classified as a long-term capital gain. If you sell your property, capital gains tax at the rate of 20 percent after indexation becomes applicable. The method of calculating capital gains on sale of property after applying indexation is explained in an easy format on this website, the article can be viewed by clicking: http://nriinformation.com/faq3/index.htm*On how to pay capital tax in India, there are some new rules that come into effect from June 1st, 2013, these rules were announced by the Indian finance minister Mr. Chidambaram during his budget speech. Some of the highlights that people buying or selling property in India should be aware of:•TDS @ 1% will be charged when the value of immovable property exceeds Rupees 50 lakh. The 50 lakh amount is the actual amount being paid for the property, without applying any deductions for indexation. •The purchaser should actually ensure that they deduct 1% TDS from the amount paid for the property. This is important as proof of the 1% tax paid will be required at time of registration of property, where value paid is Rupees 50 lakh or more. Those buying properties from NRIs will have to be more careful that they withhold the 1% TDS or they may have to pay it themselves, in case such sellers leave the country.•When tax is deducted at source (TDS), then a TDS receipt has to be issued to show the amount of tax withheld. TDS receipts can only be issued by those who have a Tax Deduction Account number (TAN). So the purchaser of the property, will have to apply for and get a TAN from the tax department, they can then issue a TDS receipt to the seller for the 1% of the purchase price withheld as TDS.•Once the purchaser deducts the TDS amount and issues a receipt, it is the purchasers responsibility to submit the money withheld as TDS to the tax authority in India.•NRIs selling property in India where the purchaser withholds the 1% TDS should ensure they get a TDS receipt. In a situation where the purchaser fails to deposit the TDS deducted with the Indian tax authorities, having a TDS receipt will be proof that the NRI has indeed paid. •NRIs pay 20% for Long Term Capital gains when selling immovable property in India. Indexation will bring the amount of capital gains down if the property has been held for a long time. (*see calculating capital gains link above) •Money from the sale of property in India by NRIs cannot be deposited in NRE accounts. So you must deposit the sale proceeds in your NRO account. Any amount you wish to transfer abroad can be done from NRO account subject to applicable rules such as a CA certificate confirming taxes have been paid and the money being transfered is indeed from the sale of immovable property in India. Recommending lawyers and accountants is something that I avoid, you just have to ask around and go with someone who you are comfortable with. Sometimes the cheapest may not the best and yet there are no guarantees that paying more will get you the best!