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NRI Selling Property in India: Indexation vs LTCG Tax?

T S Khurana |392 Answers |Ask -Follow

Tax Expert - Answered on Sep 24, 2024

A certified management accountant since 1993, T S Khurana is a fellow member of The Institute of Cost Accountants of India. His areas of expertise are income tax, specifically litigation cases, and GST.

Since the last 21 years, he has also been providing expert advice on financial matters, including investments and diversification of funds, and wealth building in the long term to his clients.
He believes that investment in real estate is the safest way for better returns and wealth generation over a period of time.

A former chairman of the Chandigarh Chapter of Institute of Cost Accountants of India, T S Khurana has also served as member of its technical committee.... more

Asked by Anonymous - Sep 22, 2024Hindi

I am an NRI, living in Germany. I would like to sell my property in India, which was purchased in 2004. As per the prevailing Income Tax rules, do I get the benefit of Indexation or as an NRI I have to pay LTCG Tax on property sale. Please clarify. Thank you.

Ans: NRI has to pay LTCG @ 12.50% without Indexation, from the F/Y 2024-25. You won't be eligible for Indexation benefit under the present Income Tax provisions.
Most welcome for any further clarification. Thanks.

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Question by Neeraj - Oct 03, 2022Hindi

I booked a house from builder in March 2012 with basic price of Rs 30.89 lakh + gst of around 3%. I paid around Rs 12.37 lakh + gst by July 2012 and balance of Rs 18.52 lakh approx + gst by 31.05.2013 in equal monthly installments. In March 2016, I paid EDC of approx Rs 1 lakh, Rs 1.43 lakh as freehold charges, stamp duty of Rs 2.27 lakh and registry charges of Rs 0.20 lakh aggregating Rs 35.79 lakh + gst. Total cost including gst is approx Rs 37.00 lakh. The registry was executed in January 2017. Now, I expect to sell my property in September 2022 at a consideration of Rs 72 lakh. I have the undernoted questions: 1. Shall I get indexation benefit from the date of payments made to the builder or date of registry? 2. Do I need to open capital gains account or can I realise the sale proceeds in my regular savings account and invest the LTCG in the chosen bonds? 3. Do I need to deposit the entire sale proceeds in the notified bonds or only the LTCG after indexation and rest money utilize in whatever way I like without attracting tax? 4. Will GST be included in the cost of acquisition of my property?

Ans: Indexation benefit will be available from the date of payments made to the builder.

If you want to avail tax exemption by investing in bonds, you have to invest amount of taxable capital gain (derived after taking benefit of indexation), in bonds within 6 months of transfer of property.

Accordingly, sale proceeds can be realised in regular saving account and can be kept till the time you invest in specified bonds.

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