Are sale proceeds obtained from inherited property taxable?

I’m a citizen of Australia, however of Indian descent. My three siblings have determined to promote the inherited household house in India and share the proceeds with me. I need to repatriate my share of this to Australia. Do I’ve to pay tax on my share in India. If so, how a lot will this be? Can I choose to pay tax in Australia as an alternative?

— Name withheld on request

Under the income-tax (I-T) regulation, the worth of any asset obtained underneath a will or by the use of inheritance just isn’t taxable in India. However, the revenue arising from switch or use of inherited property in India might be taxable in India.

Sale of immovable property might be taxable in India within the yr of sale of property. Any immovable property held for a interval of greater than 24 months is classed as long-term capital asset. For inherited property, the holding interval could be calculated from the date of acquisition by the unique proprietor.

Further, the price of the property will even be reckoned as regards to the associated fee incurred by the unique proprietor. If the property was acquired by the unique proprietor previous to 1 April 2001, the associated fee might be substituted with truthful market worth (however not exceeding the stamp responsibility worth on 1 April 2001) if such truthful market worth is greater than the unique price. The price of enchancment i.e., capital expenditure incurred for making additions or alterations to the property incurred after 1 April 2001 by the unique proprietor or taxpayer can be thought-about within the computation of capital features in such switch.

In case of a long-term capital asset, the taxable capital acquire might be full worth of consideration much less expenditure incurred wholly and completely in reference to such switch much less listed price of acquisition (precise price of acquisition adjusted as per price of inflation index (CII)) much less listed price of the development.

The long-term capital acquire (LTCG) is taxable at 20% (plus relevant surcharge and well being & training cess).

A warning level right here: if the stamp responsibility worth of the property is greater than 10% of sale worth, the stamp responsibility worth could also be thought to be the total worth of consideration receivable for computation of capital features.

The LTCG from sale of residential property might be claimed as exempt from Income tax to the extent the capital features are being reinvested in “specified bonds” in India

If the LTCG stays un-invested until the due date of submitting of India tax return (31 July), there may be an choice to deposit the quantity of capital acquire in a Capital Gains Account Scheme (not later than the due date of submitting the India tax return) and subsequently withdraw this quantity for reinvestment within the new residential home inside the stipulated interval (2 years/3 years, because the case could also be).

If the complete quantity just isn’t reinvested or not deposited within the scheme, the remaining portion of the LTCG might be taxable.

Thus, your share of capital features on the sale of immovable property in India might be taxable in India if not claimed as exempt from Income-tax to the extent the capital features are reinvested in India .

You can’t select to pay tax in India or Australia. If you qualify as a resident of Australia and if such revenue on the sale of immovable property can also be taxable in Australia, chances are you’ll declare the international tax credit score in Australia for taxes paid in India towards doubly taxed revenue as per the relevant provisions of the Double Taxation Avoidance Agreement (DTAA) between India and Australia.

Tax on LTCG might be both paid by the use of advance tax in 4 instalments (15% by 15 June, 45% by 15 September, 75% by 15 December and 100% by 15 March) or earlier than submitting of a tax return by the use of self-assessment tax together with curiosity by 31 July.

The requirement to pay advance/self-assessment tax will come up if the customer of the residential property doesn’t deduct full tax payable by you.

Sonu Iyer is tax associate and folks advisory companies chief, EY India.

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