NRI's CORNER
F.E.M.A.
Capital Gain of Immovable Property & Other Assets Held For 3 Years. or less
 
NRIs CORNER - SHORT TERM CAPITAL GAINS FROM IMMOVABLE PROPERTY / OTHER ASSETS
 
Short Term Capital Gains [ STCG ] arising on sale of all movable assets and immovable properties other than shares and debentures of Indian Company and mutual funds are dealt almost at par with other taxable income in India . Brief features of tax treatment under the Income - Tax Act, 1961 [ I.T.Act ] are :
 
1.    Capital Gains - Meaning :  
.01  Profits and gains earned upon sale of any immovable or movable  assets are taxed under the head of "Capital Gains" under the Income Tax Act, 1961.
.02  Capital Gain will arise at the time of transfer i.e. sale, exchange, partition of family, relinquishment etc.
.03  Such gains  are classified  as  "Long Term Capital Gains (LTCG)"  if  the assets are held for a period  of more than 36 months and as "Short Term Capital Gains (STCG ) if held for lesser period.
.04  Gains of Shares of a Company or equity, debt or balanced schemes of mutual funds are defined as LTCG if the same are held for more than 12 months.
 
2.    Capital Gains - Computation :
.01 LTCG of listed equity shares and equity schemes of mutual funds subject to security transaction tax (STT) are totally exempt from tax.
.02  LTCG from securities listed in India , Units of Indian Mutual Funds and Zero Coupon Bonds shall be   
       taxed at 20% after indexation or tax at 10% without indexation.
.03  Other LTCG are taxed at 20% after indexation .
.04 STCG of equity shares and equity schemes of MFs subjected to STT are taxed at 15%.
.05  STCG of other assets are taxed at normal rates of applicable tax on total income.
 
3.    Tax Rates :
.01  LTCG of listed equity shares and equity schemes of mutual funds subject to security transaction tax  (STT) are totally exempt from tax.
.02 LTCG from  securities listed in India , Units of Indian Mutual Funds and Zero Coupon Bonds shall be  tax at 20% after indexation or tax at 10% without indexation.
.03  Other LTCG are taxed at 20% after indexation.
.04  STCG of equity shares and equity schemes of MFs subjected to STT are taxed at 15%.
.05  STCG of other assets are taxed at normal rates of applicable tax on total income.
 
4.    Tax Exemptions ;
.01 LTCG of any house property and other movable assets will be exempt from tax if the same are invested in purchase of a house property ; capital gains bonds etc which are discussed in details under appropriate topics herewith.
.02  STCG of any asset does not qualify for any tax exemptions whatsoever.
 
 5.    Disadvantage NRIs :
.01  Non Resident are at a disadvantage as against residents as re: LTCG of all assets or STCG of listed   shares or Mutual Fund Units as the basic threshold exemption limit is not deductible while computing the tax on said capital gains in case of non-residents.
.02  Thus a non-resident will be paying tax on gross amount of said LTCG or STCG including the basic threshold exempt limit of INR 2,50,000.
.03  And as such entire LTCG will be taxed at 20% or 10% as the case may be and STCG of listed shares or Mutual Funds Units will be taxed at 15% from the 1st Rupee gain.
 
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