3 Ways to save your Capital Gain Taxes for NRIs

Attractive Investment, Complex Sale:

Owning property in India is a popular choice for many NRIs (Non-Resident Indians). However, selling it can involve more steps than buying. Understanding the tax implications is crucial to ensure a smooth and profitable transaction.

Tax Considerations for NRIs:

Capital Gains Tax:

• NRIs pay tax on profits (capital gains) made from the sale.
  

Short-Term Capital Gain (STCG):

• Applies if the property is sold within 2 years of purchase. Taxed at your income tax slab rate.

Long-Term Capital Gain (LTCG):

• Applies if the property is sold after 2 years. Taxed at 20%.

Calculating Capital Gains:

• It’s the difference between the final sale price and the cost of acquisition (initial purchase price) minus home improvement costs and transfer costs.
  

TDS (Tax Deducted at Source):

Residents:

• 1% TDS on property sale.

NRIs:

• 
  

  • Within 2 years of purchase: 30% STCG TDS.

  • After 2 years: 20% LTCG TDS.

Important Note: TDS is deducted from the sale price, not just the capital gain.

Maximizing Your Profit:

Here are three strategies to minimize your tax burden and maximize profit:

Option 1: International PAN Transfer

• Obtain an operative PAN (Permanent Account Number) for tax benefits. It’s required to apply for a Lower TDS certificate, which reduces upfront tax deductions.

Option 2: Reinvest in Property (Section 54)

• Exempt capital gains tax by reinvesting the sale proceeds in a new residential property within 1-2 years (or 3 years for under-construction). The new property must be in India and held for 3 years.

Option 3: Invest in Government Bonds (Section 54EC)

• Invest capital gains up to Rs 50 lakh in NHAI or REC bonds to avoid tax. These bonds have a 5-year lock-in period and offer a fixed interest rate (currently 5.25%).

Seek Expert Guidance:

The Indian real estate market and tax rules can be complex. Consulting a tax advisor ensures a compliant and profitable property sale.

Final Thoughts:

Careful planning and understanding the tax implications are key to a successful NRI property sale in India. Utilize the strategies above and seek professional advice to navigate the process with confidence.

At NRI Assist Services, we help NRIs across the Globe to sell their properties. You can WhatsApp us: https://wa.me/message/2KGAATYMDLUPN1 or reach out at +91 9810915147.

Book a free 30-minute consultation here: https://calendly.com/30minscall .

Explore their offerings at https://nriassist.in. Cheers!