NRIs CORNER - LONG TERM CAPITAL GAINS OF IMMOVABLE  PROPERTY  & OTHER ASSETS  OTHER THAN RESIDENTIAL HOUSE, SHARES & MUTUAL FUNDS

Like most advanced nations, India also has a pragmatic approach while taxing gains arising out of Sale of Capital assets. By taxing gains on Long term investments at lower rates the Government indirectly encourages Investments for growth and development rather than trading of capital assets. Tax provisions of such gains from immovable and movable assets are discussed herein:

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 24 months in case of Immovable property and 36 months in any other asset and as "Short Term Capital Gains (STCG) if held for lesser period.

2.Capital Gains - Computation:

.01  While calculating the LTCG, Indexed cost. will replace the actual cost.

.02  Indexed cost is computed increasing the purchase price by notified cost of living index for the year in which acquired/purchased

.03  LTCG are arrived at by deducting such indexed cost from the sale price.

.04  In case of immovable properties, sale price is to be replaced by the valuation of the property determined by the State Registrar for Stamp Duty payable by the buyer if the same is higher.

3.Tax Rates:

.01  LTCG are taxed at 20% after Indexation.

4.Tax Exemptions:

.01  Capital gains of immovable property and other movable assets will be exempt from tax if the same are invested in purchase of a Residential house property; Capital gains bonds etc. which are discussed in details under appropriate topics here with. 

5.Disadvantage NRIs:

.01   Non-Resident will be paying LTCG tax on gross amount of LTCG without benefit of basic exemption limit.

.02   And as such entire LTCG will be taxed at 20% subject to Indexation from the first Rupee gain.

.03   STCG will be taxed at normal tax rates as applicable to the slab of net taxable Income.