The sale of property by NRIs in India attracts long term capital gains tax in case the property had been held for over three years. Besides this TDS is also charged on realized capital gains in case the NRI applies for certificate of non-deduction or lower deduction with the income tax authorities and the same approves it. Else, the TDS is deducted on the actual sale price. Know in detail about tax implication on property sale by NRIs in India.
But there are ways in which NRIs can avoid this tax deduction at source (TDS). One of them is if the NRI decides to and reinvest the capital gains amount realized from the property sale in another property within a span of two years or in tax-free bonds in six months time. The re-investment of capital gains into either of the investment makes the NRI eligible for tax benefit and as a result any gains on such a property sale transaction are no longer taxed in India. Also, TDS deduction will not be made.
To claim tax exemption on the property sale transaction, the NRI will need to apply for the tax exemption certificate with the Income Tax Authority u/s 195 of the Income Tax Act. Thereafter, the NRI can approach his Financial Consultant or Chartered Accountant for filing Form 15CA and CB that will underline that the NRI has no tax liability in respect of the property transaction. Further, he can then remit the proceeds of the transaction to his country of residence.
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