My son who’s US citizen needs to promote property in India. How will or not it’s taxed?

My son is a US citizen. He owns a residential property right here in India. He needs to promote it. Would you pleas information us concerning the tax implications on it? Also, if he would not promote it and as an alternative items it to his sibling, what would be the tax implications on that?

– Name withheld

The residential standing of the particular person will outline tax legal responsibility in India. If the particular person is a non-resident Indian (NRI) as per the provisions of the Income Tax Act, he’s liable to pay revenue tax on revenue that accrues or arises in India. Hence, in case your son owns a residential property in India and needs to promote it, he shall pay capital positive aspects tax on the positive aspects arising from such sale. However, the tax legal responsibility will rely upon whether or not the achieve is a short-term or long-term capital achieve.

If an NRI sells a residential property after 24 months (diminished from 36 months to 24 months in Budget 2017) from the date of possession, proceeds from the sale of such property will probably be thought-about as long-term capital achieve. However, if the residential property is held for twenty-four months or much less, the achieve will probably be short-term capital achieve. Tax implications for NRIs are additionally relevant within the case of inheritance.

Long-term capital positive aspects are taxed at 20% plus cess, and short-term positive aspects are taxed at slab charges relevant to NRIs based mostly on whole revenue, which is taxable in India.

However, when an NRI sells a property, the customer is liable to deduct a TDS at 20%. And if the property is offered earlier than 24 months, a TDS of 30% is  relevant. The NRI can file ITR and declare the refund of extra tax deducted at supply.

To reply the second a part of the query, if NRIs reward property to an Indian citizen, the place the truthful market worth of the property exceeds ₹50,000, it’s taxable within the palms of the receiver of the reward. However, if the reward is given to family (outlined within the Income Tax Act), it isn’t taxable both to the receiver or the one gifting. Hence, if an NRI items residential property to its sibling, it isn’t taxable.

(Query answered by Archit Gupta, founder and CEO, Clear. Send your queries at mintmoney@livemint.com)

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