Trusted by 2 Million+ Users
4.8 Star User Rating
Secure & Safe
Non-resident Indians (NRI) are liable to income tax only on the income earned from Indian sources. Selling property in India is one of the transactions that most NRIs do, but as an NRI, do you know this transaction attracts capital gain taxes? The tax amount to be paid depends upon the holding period of the property. If an NRI sells its property within two years of its date of purchase, short-term rates are applicable. However, if they sell it after two years, Long-Term Capital Gains taxes become applicable. Let us talk about it in detail.
Like for resident investors, the taxability of capital gains for NRIs also depends on the holding period and the type of investments sold.
Short-Term Capital Gains (STCG): These gains arise from the sale of capital assets held for less than the specified holding period. The holding period varies depending on the type of asset:
Long-Term Capital Gains (LTCG): These gains are earned from the sale of capital assets held beyond the specified holding period:
For investments like debt-oriented funds and unlisted securities besides shares, along with other capital assets, the distinction between short and long term is crucial. If held for over 36 months, it's deemed long term; otherwise, it's treated as short term.
Long-term gains from such investments, including debt-oriented funds, are subject to a 20% tax rate with indexation. Short-term gains, however, are integrated into the individual's taxable income and taxed according to their applicable slab rate.
Furthermore, both short-term and long-term gains are subject to an additional 4% education and higher education cess.
NRI Capital Gain Tax on Shares
When it comes to capital gains from listed equity shares or equity-oriented mutual funds, the tax implications differ based on the duration of the investment. For shorter durations, specifically less than 12 months, it falls under the bracket of short-term capital gains. In such cases, NRIs face a tax rate of 15%, and there's a corresponding TDS at the same rate.
For investments held longer than 12 months, they are categorized as long-term capital gains. The tax rate applied here is 10%, but this is only on gains exceeding ₹1 lakh. Moreover, there's a TDS deduction at 10% from these long-term capital gains.
This distinction between short-term and long-term capital gains allows for a more nuanced understanding of tax liabilities, offering incentives for longer-term investments while ensuring a fair taxation system for shorter-term gains.
As an NRI have you recently invested in stock market in India? To know how the gains, dividends will be taxes, consult Tax2win tax experts and minimize your taxes.
Long-Term Capital Gains (LTCG) on property are subject to a flat rate of 20%, allowing investors to benefit from indexation to offset inflation. Meanwhile, LTCG on equity shares and units of equity-oriented mutual funds incur a 10% tax on gains exceeding ₹1 lakh, with other assets taxed at 20%.
Short-Term Capital Gains (STCG) vary based on the applicability of Securities Transaction Tax (STT). When STT isn't applicable, STCG is taxed at normal slab rates. However, when STT is applicable, a 15% tax rate is imposed.
The exemptions and investment options available for long-term capital gains (LTCG), along with how Non-Resident Indians (NRIs) can utilize them for tax benefits:
Save maximum taxes as an NRI on the investments made in India, hire an online CA. You can also connect with the experts at +91 91166 84439 | [email protected]
India has entered into Double Taxation Avoidance Agreements (DTAAs) with numerous countries, with the primary objective of granting relief to Non-Resident Indians (NRIs), Persons of Indian Origin (PIOs), and Overseas Citizens of India (OCIs) from double taxation. Eligibility for claiming these benefits hinges upon being a tax resident in a nation with which India has concluded a DTAA.
Under Section 54, Non-Resident Indians (NRIs) have the opportunity to seek exemption on capital gains arising from the sale of a long-term residential property in India. This exemption can be availed by reinvesting the proceeds in the purchase of a new residential house within the country.
The Foreign Exchange Management Act (FEMA) delineates explicit guidelines for discerning the residency status of individuals of Indian origin, whether they are classified as Resident Indians or Non-Resident Indians. To qualify as a Resident Indian, an individual must have resided in India for a minimum of 60 days in the previous year and at least 365 days in the preceding four years.
In accordance with FEMA regulations, no penalties are imposed for failing to declare your Non-Resident Indian (NRI) status. However, it is imperative to either close your current savings account or promptly convert it into a Non-Resident Ordinary (NRO) savings account.
