Q.1139 Capital gain tax

exemption on Indian property

for USA resident

Question: Dear Sir/Madam, I purchased a independent house jointly with sister in 2009 for 34,00000/- (sale agreement says 34lacs but property was registered for 14 lacs) in March 2018 we are selling it for 60,00,000/- in total with each of us getting 50% and we both stay in USA but on a dependent Visa, Please advise on the following want to know my tax liability and if the sale proceeds will it be deducted at source. In case of tax on capital gains, I understand that I can invest the gains in rec/nhai bonds. Should this investment be made before the tax is deducted or after I get the proceeds. Please advise Regards Answer: Regarding your questions there are a few things you should be aware of and perhaps you should check with your accountant before finalizing the sale: • When your property is sold, the buyer is supposed to deduct TDS from the selling price. As you reside in the United States you are considered to be a NRI, the TDS deduction will be 20%. If you have no other income in India, your accountant may advise on getting a lower or no deduction TDS certificate from the tax authorities to stop the buyer from deducting TDS. • In case TDS does get deducted you will have to file tax and depending on your income, pay tax or get a tax refund.

Investment in bonds by NRI to save

long term capital gains in India

• Any Gain associated with long term capital gain on the sale of property/shares/stocks in India must be invested in approved tax saving investments such as National Highways Authority of India and Rural Electrification Corporation within six months of the sale for the capital gain to be tax exempt. This capital gain exemption applies only in India. • Note: There is a 50 lakh purchase limit on such bonds. • Bonds purchased to save long term capital gains must be held for three years. If sold before the three year period, the tax exemption would be canceled and become payable

Information for US residents on Indian

capital gains savings and US taxes

• US residents should be aware that any tax saving instruments that are available in India to save long term capital gains tax, apply on in India. Such deductions do not apply in USA. Tax if exempted in India may still be payable in USA. o When foreigners conduct property transactions in India they need to comply with not only Indian tax laws but also the taxation rules and regulations of their home countries. In terms of US citizens, they must comply with US tax reporting and filing requirements regardless of where in the world they live. • Interest earned on capital gains savings bonds would be taxable in India and in the United States