Many Non-Residents Indians (NRIs), PIO and OCI’s, especially from North America and Europe, often visit India to sell their property. The property sale in India is due to consolidation of assets and property which may be a little difficult for the NRI to manage or the Returns on investments have been very good and it is a good time to exit.
Selling the property with a proper price and documentation is a little challenge in India, and the next challenge is to remit the money back to the Country of Residence. This was very complex earlier, but with the liberalization, things have become easier.
The Property may either be bought by the NRI from funds sent from overseas, or it may have been gifted or inherited by the Non Resident Indian from parents or other close family members.
What is the Capital Gains Tax on Inherited Property by NRI in India?
In case of property inherited by the Non Resident Indian (NRI) or the Overseas Citizen of India (OCI) or the Person of Indian Origin (PIO), there is NO tax implication on them in India, unlike many other countries. However, you need to take note of the Residency Status and the provisions of Taxation in the home country also.
When dealing with cross-border transactions, it is important to take not of the Double Taxation Avoidance Agreement (DTAA) between India - US, DTAA between India – UK, DTAA between India – Singapore, DTAA between India – Australia and many other similar agreements where there are provisions for Capital Gains Tax.
How to Calculate Capital Gains Tax on Inherited Property sale by a NRI?
When you are selling an inherited property, the Tax is payable on the profits that you have had, ie: the Capital Gains. In case of selling of an inherited property by an NRI the Capital Gains will be calculated as per the purchase price of the person who had initially bought the property.
For example, if Mr Ashok Gupta, an Non Resident Indian, has inherited a property from his father Mr Bajrang Gupta by way of a Will and a Probate in court, and Mr Ashok has sold the property after say 5 years for Rs 1 crore, then there will not be any Inheritance Tax payable by Mr Ashok when he has inherited the property, however a Capital Gains Tax will be payable by Mr Ashok. The Capital Gains Tax on a Non Resident Indian Mr Ashok will be on the difference Selling Price which is Rs 1 Crore and the Cost Price of Mr Bajrang Gupta, his father.
Tax Assist is a professional income tax consultancy in India for both corporate houses and individual tax payers; the latter comprising Salaried Individuals, Seafarers, Professionals and Non Resident Indians.
With the help of Tax Assist and its team of income tax professionals, taxpayers can minimize their Income Tax liability, maximize their net income and create opportunities to save for current and future needs while maintaining proper accounting standards and income tax returns which are compliant with the Law.
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