The Union Budget 2022 included provisions for high-net-worth non-resident Indians (NRIs) selling property in India. The finance minister has proposed capping the surcharge rate on long-term capital gains (LTCGs) to transfer any long-term capital assets at 15%. The goal is parity with the surcharge rate on LTCGs tax from various assets. Currently, LTCGs on the transfer of real estate assets attract a surcharge of up to 37 per cent if an individual taxpayer’s income exceeds the threshold of 5 crores in a fiscal year. In contrast, the taxation on LTCGs from listed securities is already capped at 15 per cent. Many NRI property sellers are subject to the currently applicable surcharge, which can be as high as 37 per cent.
Furthermore, NRIs must pay the tax deducted at source (TDS) on the entire property value, not just the gains. Increasing the surcharge rate on LTCGs to 15% would be a huge relief. On the taxation front, the revenues total about 4.5 per cent. Let’s take a look at the tax implications that NRI property sellers must consider:
TDS following Section 195: TDS must be deducted when paying an NRI. The number of TDS deducted and the rate at which it was debited should be specified in the sale agreement between the NRI seller and the buyer. The buyer’s TDS should be deposited through challan no. / ITNS281 for TDS payment on or before the 7th of the month following the month in which TDS was debited. TDS can be deposited at banks authorised by the Government of India or the Income Tax (IT) Department to collect direct taxes.
Before deducting TDS, property buyers should also obtain a TAN under Section 203A of the IT Act, 1961. Form 49B must be completed and submitted to get a TAN. Also, keep in mind that the seller cannot apply for a lower TDS certificate unless they have the buyer’s TAN. However, it should be noted that the surcharge will be reduced beginning with the fiscal year 2022, or 1 April, according to the Union budget proposal. It is critical to remember that the above deductions are applied to the entire payment, not just the gain. For example, the applicable TDS rate for property worth six crores (or more than five crores) is 28.496 per cent. Once the surcharge rate is capped at 15%, the highest effective TDS rate will be 23.92 per cent, rather than the current 28.496 per cent, representing a savings of more than 4.5 per cent for NRIs.
Asset remittance by NRO/PIO: An NRI or a Person of Indian Origin (PIO) may remit up to $1 million per fiscal year from the balances in his non-resident ordinary (NRO) rupee account/sale proceeds of assets (inclusive of assets acquired by way of inheritance of settlement). Initially, the sale proceeds should be credited to the NRO account. If the seller can persuade the bank that the property was purchased with their international funds or that the payment for the purchase was made through their NRE account, they can transfer funds from NRO to NRE and repatriate them.
Also, keep in mind that the seller will need a copy of the registered sale deed to make the remittance. This point is crucial as the registry approaches the end of the fiscal year or March. If a scanned copy of the registered sale deed is not shared with the bank, the seller may exceed the yearly limit. We believe that for NRIs looking to sell their property, taking advantage of the reduced surcharge of 15% on capital gains, which will begin in April 2021, will be highly beneficial.
The above information is from online news- MINT
Any person logging into or using the site (“the Visitor”) has unconditionally accepted the terms and conditions of use and these constitute a binding and enforceable agreement between the visitor and the Wealth Clinic Pvt. Ltd.
This website collects cookies to deliver better user experience.