Does a non-resident need to pay tax on sale of property in India?

As a non-resident, you’re required to pay tax on the sale of the ancestral property in Mumbai, much like a resident. For the reason that property has been held for greater than 24 months, any earnings from the sale will likely be thought-about long-term capital positive aspects.

For the calculation of capital positive aspects, the price of acquisition is essential. Within the case of inherited property, the associated fee is taken into account as the worth paid by the earlier proprietor. For the reason that property was acquired earlier than 1 April 2001, the price of acquisition for capital acquire functions is the honest market worth of the property as of 1 April 2001.

To find out the honest market worth, you should use the relevant charges or values such because the circle fee or stamp obligation fee of the property on that date. If these values are unavailable, acquiring a valuation report from a registered valuer is important. You will need to word that the valuation report’s worth mustn’t exceed the prescribed charges or values.

The fee is then elevated by making use of the associated fee inflation index of the yr of sale. The distinction between the sale value and the listed price constitutes the long-term capital positive aspects, taxed at a flat fee of 20%. To mitigate this tax, you could have the choice to speculate the listed long-term capital positive aspects in a residential property or specified capital positive aspects bonds throughout the specified interval. As a non-resident, the customer is obligated to deduct tax at 20% on the computed long-term capital positive aspects if you happen to present documentary proof of the associated fee. Failure to supply proof will outcome within the purchaser deducting tax at 20% on the complete sale consideration.

For those who do not need another revenue taxable in India, you can be required to pay tax at 20% on the capital positive aspects, as non-residents can’t offset the shortfall within the fundamental exemption restrict in opposition to long-term capital positive aspects.

Aditya Chopra is managing associate and Amay Jain is Senior affiliate at Victoriam Legalis—Advocates & Solicitors.

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Up to date: 22 Nov 2023, 12:12 AM IST