Non-Resident Indian: How to Save Tax on Property Sale Profit?

Ans: When selling property, you might face long-term capital gains tax. Here are some strategies to save on these taxes.

Investment in Infrastructure Bonds

Section 54EC Bonds

Eligible Bonds: You can invest in specific infrastructure bonds under Section 54EC to save on capital gains tax.

Investment Limit: The maximum investment limit in these bonds is Rs 50 Lakhs. You must invest within six months of the property sale.

Lock-in Period: These bonds come with a lock-in period of five years. During this period, you cannot withdraw your investment.

Benefits and Considerations

Tax Savings: Investing in these bonds exempts you from paying long-term capital gains tax.

Interest Income: These bonds provide annual interest income, but this income is taxable.

Liquidity: The lock-in period reduces liquidity, which is a key consideration before investing.

Reinvestment in Property

Section 54 Benefits

Residential Property: Reinvesting the sale proceeds into a new residential property can save you from long-term capital gains tax under Section 54.

Purchase Timeline: You must purchase the new property within two years from the sale date. Alternatively, you can construct a new property within three years.

Multiple Properties: You can reinvest in multiple properties, but there are conditions on the use of funds and the timing of investments.

Key Considerations

Utilization of Gains: The entire capital gains amount must be utilized for the purchase or construction of the new property.

Unutilized Gains: If you cannot utilize the gains within the stipulated time, deposit the unutilized amount in a Capital Gains Account Scheme (CGAS) before filing your income tax return.

New Property Sale: If you sell the new property within three years, the capital gains exemption claimed will be revoked.

Professional Guidance for Strategic Planning

Consult a Certified Financial Planner

Expert Advice: A Certified Financial Planner can provide tailored advice on how to best reinvest your capital gains to maximize tax benefits and align with your financial goals.

Holistic Approach: They can offer a comprehensive plan that considers all aspects of your financial health, ensuring a balanced approach.

Regular Review and Adjustment

Monitor Investments: Regularly review your investments to ensure they align with your long-term goals.

Adjust Strategy: Be ready to adjust your strategy based on changes in your financial situation, market conditions, or tax laws.

Final Insights

Saving on long-term capital gains tax when selling property requires strategic planning. Consider investing in Section 54EC bonds or reinvesting in a new residential property. Consulting a Certified Financial Planner can help you make informed decisions and ensure your financial health is well-managed.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner,

www.holisticinvestment.in

Ans: 01. Unlike LTCGs, there is no specific Tax Saving Instruments, in case of STCGs.
02. STCG will be treated like any other Income in ITR and taxed accordingly.
03. Keeping in view you taxable income, you may plan for tax saving investments/expenses. This may help you to reduce your tax liability.
Most welcome for any further clarification. Thanks.

Ans: None.

Ans: 01. Unlike LTCGs, there is no specific Tax Saving Instruments, in case of STCGs.
02. STCG will be treated like any other Income in ITR and taxed accordingly.
03. Keeping in view you taxable income, you may plan for tax saving investments/expenses. This may help you to reduce your tax liability.
Most welcome for any further clarification. Thanks.

Ans: My view is that their is NO way you can avoid short term capital gain tax accruing due to sale of property within one year.

However you may consult a CA to get a specific feedback on aspects of tax saving in your case.