What is the tax payable when NRI sells real estate in India?

Question

Mr X an NRI purchased a flat in Goa for 6 lakhs in Aug-1996. He sells it for 10 lakhs in Aug-2006. If he has no other source of Indian income

1. What is his tax liability ?

2. Are there ways to minimise the tax liability ?

I understand that benefit of indexation is not available to NRIs (according to Delhi Income Tax website)

Answer 1

Whether NRI or Not (Common to all) Purchase cost as off now, as per Income tax is Rs.977705/-

Capital gain profit comes to Rs.22295/-

NRI can have income upto 100000/- since his income is below taxable so there is no tax on 22295/-

Answer 2

First of all , you should know and you will be happy to know that EVEN NRI get indexation benefits on long term capital gains .

NRI does not get benefits of Indexation only in case of sale of shares and debentures ,that too , if the shares and debentures are purchased and sold on foreign currency.

Section 48 of the I T Act is very clear on this..Read it :

"Section 48. The income chargeable under the head Capital gains shall be computed, by deducting from the full value of the consideration9 received or accruing as a result of the transfer of the capital asset the following amounts, namely :

(i) expenditure incurred wholly and exclusively in connection with such transfer9;

(ii) the cost of acquisition of the asset and the cost of any improvement9 thereto:

10Provided that in the case of an assessee, who is a non-resident, capital gains arising from the transfer of a capital asset being shares in, or debentures of, an Indian company shall be computed by converting the cost of acquisition, expenditure incurred wholly and exclusively in connection with such transfer and the full value of the consideration received or accruing as a result of the transfer of the capital asset into the same foreign currency as was initially utilised in the purchase of the shares or debentures, and the capital gains so computed in such foreign currency shall be reconverted into Indian currency, so, however, that the aforesaid manner of computation of capital gains shall be applicable in respect of capital gains accruing or arising from every reinvestment thereafter in, and sale of, shares in, or debentures of, an Indian company :

Provided further that where long-term capital gain arises from the transfer of a long-term capital asset, other than capital gain arising to a non-resident from the transfer of shares in, or debentures of, an Indian company referred to in the first proviso, the provisions of clause (ii) shall have effect as if for the words cost of acquisition and cost of any improvement, the words indexed cost of acquisition and indexed cost of any improvement had respectively been substituted:"

In my view , not only Mr X will not have to pay any tax but will actually get benefit of carry forward of long term losses by applying indexation .