How Should I File Foreign Rental Income?

—Name withheld on request

As per Income Tax Rules (Rule 115), the rate of conversion of earned income into foreign currency shall be TTBR (Telegraphic Transfer Buying Rate) as on the specified date. TTBR is issued by State Bank of India. For converting the rental income earned in foreign currency, the specified date is the last day of the financial year. Therefore, you must consider the TTBR of the last day of the financial year that will be filed in India for computing the rental income to be reported in your income tax return. If this rental income is received by you directly into a bank account in India, you should take the amount credited to your account in Indian Rupees.

I bought a flat in 2014 for 5 Crore in Mumbai I moved to Canada in 2015 for my job and since then I have been living here. Now I want to sell my property. How will this amount be taxed? Also, is there any way to reduce the tax paid in India?

—Name withheld on request

The computation of capital gains from the sale of immovable property is the same for NRIs and Resident Indians. Gains from the sale of assets held for more than 24 months are considered long-term capital gains. To calculate long-term capital gains, the cost of the asset will be indexed according to the Cost Inflation Index (CII). Any cost of improvements made can be indexed likewise. This indexed cost of acquisition and the indexed cost of improvements will be reduced by the selling price to arrive at the capital gain.

You are allowed to claim exemption from capital gains by investing your capital gains in buying a new residential house as per the conditions prescribed under Section 54 of the Income Tax Act. Under this section, a new residential property must be purchased either before one year or after two years or a new property must be constructed within three years from the date of transfer of the property. You must not sell this newly acquired property within three years of purchase. You can claim exemption from capital gains by investing your capital gains in specified bonds within six months from the date of transfer of the asset.

Archit Gupta is the founder and CEO of Clear.in.