The one question that bothers every NRI is related to properties. Some property compliances can’t be avoided whether an NRI is purchasing or selling the property.
Property tax is a recurring levy that a property holder, whether a citizen of India or an NRI, pays yearly to the municipality. A one time taxis to be paid when the property is purchased, tax is paid through Tax Deducted at Source (TDS). The property tax case is a bit different from the residents of India. NRIs are to follow Section 195 of the Income Tax Act.
TDS is payable the income tax department even though the person selling or purchasing any property in India is a resident of the country or an NRI. 1% TDS is to be deposited, calculating on the entire sale proceeds.
When selling property, the tax calculations will again depend on whether it is Long Term Capital Gain or Short Term Capital Gain. The property will fall under Long Term Capital Gain if held for more than two years and will be taxed at 20%. And a tax rate of 30% of the profit applies to Short Term Capital Gain.
Certain exemptions are available for NRIs under Section 54 of the Tax Act. NRIs can reclaim the entire Long Term Capital Gain under Section 54 by investing the sale proceeds in another property.
Under Section 54EC, the NRI can invest the sale proceeds in the National Highway Authority of India (NHAI) and the Rural Electrification Corporation (REC) to save tax.
