My friend is a NRI (living in Australia) disposing his plot owning in Bangalore & wants know howmuch LTCG Tax need to pay & what is procedure. Thanks

Ans: Many NRIs face confusion when selling property in India. Your friend’s case is important and needs a 360-degree explanation to avoid tax leakages and compliance issues.

Let’s break this down step by step in simple terms.

? Property Sale and Capital Gains Tax

– If your friend owned the plot for more than 24 months, it is long-term.
– Long-Term Capital Gains (LTCG) tax is applicable.
– For NRIs, LTCG is taxed at 20% with indexation benefit.
– But TDS will be deducted at 20% plus surcharge and cess.
– This can push the effective TDS up to around 23-24%.
– Even if the actual tax is less, TDS is deducted at higher rate.
– So, refund needs to be claimed later by filing ITR in India.

? Indexation and Cost of Acquisition

– Indexation means original cost is adjusted for inflation.
– It helps to reduce the taxable gain.
– Your friend should get the cost inflation index (CII) for purchase year.
– Also, apply CII for the sale year.
– Indexed cost = Purchase cost x (CII of Sale Year / CII of Purchase Year)
– Subtract indexed cost from sale price to get LTCG.
– On this LTCG, 20% tax is applicable.

? TDS for NRI Seller – Important Point

– Buyer must deduct TDS before paying to your friend.
– Section 195 mandates TDS for NRI sellers.
– For LTCG, TDS is 20% plus surcharge and cess.
– TDS is on full capital gain amount (not just profit).
– If the buyer fails to deduct TDS, they face penalty.
– Your friend must give their PAN to avoid 30% TDS.

? Apply for Lower or Nil TDS Certificate

– Your friend can apply for a lower TDS certificate.
– This is done via Form 13 to the Assessing Officer.
– It takes time, so start early before sale date.
– If granted, buyer will deduct TDS as per this certificate.
– It helps avoid over-payment and waiting for refund.

? Tax Filing and Refund (if needed)

– Even if TDS is deducted, ITR must be filed in India.
– This helps to calculate exact tax liability.
– If actual tax is less than TDS, refund will come.
– Refund takes time, but it is necessary to claim excess.
– Must file ITR before deadline (usually 31 July).

? Repatriation of Sale Proceeds to Australia

– Funds from sale can be repatriated after sale.
– First, tax must be paid and ITR filed.
– Then your friend needs a certificate from CA (Form 15CB).
– Also file Form 15CA online on income tax portal.
– With these, banks will allow money transfer abroad.

? Capital Gains Exemption Options

– To save LTCG tax, exemptions can be used.
– Section 54F can apply if your friend buys a house.
– Must buy a residential house in India within 2 years.
– Or construct within 3 years of plot sale.
– He must not own more than one house before.
– Or invest in Capital Gains Bonds under Sec 54EC.
– Max Rs 50 lakhs can be invested in these bonds.
– Bonds must be bought within 6 months of sale.
– These lock in for 5 years and give 5% interest.
– No tax is levied if entire capital gain is invested.
– If not full, then tax is levied on unutilized amount.

? Documents Required for Sale and Tax Compliance

– PAN Card (must be linked to Aadhaar).
– Sale deed copy of the plot.
– Original purchase deed with date and amount.
– Details of stamp duty, registration cost paid.
– Bank statements showing payments if any.
– CII Indexation chart for calculating LTCG.
– Buyer’s PAN and contact details.
– CA Certificate (Form 15CB).
– Filed Form 15CA acknowledgement.

? Be Careful of These Common Mistakes

– Not applying for lower TDS certificate in time.
– Ignoring to file ITR assuming TDS is final.
– Not keeping original purchase records.
– Repatriating funds without tax compliance.
– Investing in real estate for exemption and later selling early.
– Claiming wrong exemption sections.
– Forgetting that 54F exemption is only for one house.

? Legal and Financial Precautions

– Make sure sale deed is correctly drafted.
– Use a reputed lawyer or legal service.
– Take a second opinion from a Chartered Accountant.
– Don’t rush sale without completing documentation.
– If funds are needed in Australia, plan repatriation steps early.
– Keep all documents scanned and safe for 7+ years.

? Finally

– NRIs selling property in India face many tax rules.
– Your friend must plan taxes and repatriation carefully.
– The best strategy is to get a Certified Financial Planner involved.
– They can coordinate with CA and bank for smooth process.
– Selling property is not just about getting a buyer.
– It is about saving tax, staying legal, and protecting wealth.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment