I bought a flat in December 2017 for ₹1.2 crore in New Delhi. However, I got a job offer in 2018 and moved to Canada as a permanent resident. I have some financial problems and wish to sell the property. How will this be taxed? I won’t be using the amount in India at all and will directly get it transferred to my account in Canada.
—Sarabjeet Singh Kohli
Sale of residential property in India will be taxable in the year of sale. Any immovable property held for a period of more than 24 months is classified as a long-term capital asset. In case of a long-term capital asset, taxable capital gains will be net sale proceeds less indexed cost of acquisition (i.e. adjusted as per cost of inflation index or CII) less indexed cost of improvement. Long-term capital gains are taxable at 20% (plus applicable surcharge and education cess). In case of a short-term capital asset (held for up to 24 months), taxable capital gains will be net sale proceeds less cost of acquisition less cost of improvement. Short-term capital gains are taxable at applicable slab rates (plus applicable surcharge and education cess).
Long-term capital gains can be claimed exempt from income-tax to the extent that they are reinvested in India in specified bonds or a residential house in India. The new residential house should be purchased within one year before or two years after the date of transfer or constructed within three years of the date of transfer. There are certain restrictions, however, on the sale of a new house bought and the amount of investment made in bonds.
If the capital gains remain un-invested till the due date of filing of India tax return (31 July), you may deposit the amount of capital gains in a Capital Gains Account Scheme (not later than the due date of filing your India tax return) and subsequently withdraw this amount for reinvestment in a new residential house within the stipulated period (two or three years, as the case may be). If the entire amount is not reinvested or not deposited in the scheme, the remaining portion of the capital gains will be taxable.
Tax on capital gains can be either paid by way of advance tax in four instalments (15% by 15 June, 45% by 15 September, 75% by 15 December and 100% by 15 March) or before filing of a tax return by way of self-assessment tax along with interest by 31 July. The requirement to pay advance or self-assessment tax will arise if the buyer of the property does not deduct full tax payable by you.
It may be clarified that India’s Double Taxation Avoidance Agreements with Canada and Singapore do not offer any relief from capital gains tax arising from immovable property situated in India.
Under the exchange control law, non-resident Indians (as defined under the exchange control law) are allowed to remit up to $1 million from the sale proceeds of property in India from their non-resident (ordinary) or account on production of documentary evidence of acquisition together with a certificate from a chartered accountant in the prescribed format. Remittance exceeding $1 million will require special permission from the Reserve Bank of India.
Under the income-tax law, the remitter is required to furnish prescribed information electronically in Form 15CA (self-declaration) based on a certificate obtained from a chartered accountant in Form 15CB, wherever applicable.