I am a citizen of Australia but of Indian origin. My three siblings have decided to sell the family home they inherited in India and share the proceeds with me. I want to return my share of this to Australia. Do I have to pay tax on my share in India? If yes, how much will it be? Can I choose to pay tax in Australia instead?
, Name withheld on request
The value of any property received under the Income Tax (IT) Act, by way of a will or by way of inheritance is not taxable in India. However, income from transfer or use of inherited property in India will be taxable in India.
real estate will be sold taxable In the year of sale of property in India. Any immovable asset held for a period exceeding 24 months is classified as a long-term capital asset. For inherited assets, the holding period will be calculated from the date of acquisition by the original owner.
Further, the cost of the property will also be calculated with reference to the expenses incurred by the original owner. If the asset was acquired by the original owner before 1st April 2001, the cost can be replaced with fair market value (but not more than the stamp duty value as on 1st April 2001) if such fair market value exceeds the original cost. Is. the cost of improvement That is, capital expenditure incurred by the original owner or the taxpayer for making additions or alterations to the asset made after 1st April 2001 may also be considered in computing capital gains in such transfer.
In the case of a long-term capital asset, the taxable capital gain shall be the full value of the consideration, less the expenditure wholly and exclusively in respect of such transfer, minus the indexed cost of acquisition (as per the cost of inflation index) Adjusted actual cost of acquisition (CII )) less indexed cost of improvement.
Long Term Capital Gain (LTCG) is taxable at 20% (plus .) applicable surcharge and health and education cess).
A cautionary point here: If the stamp duty value of the property exceeds 10% of the sale price, then the stamp duty value can be treated as the full value of consideration receivable for computing capital gains.
LTCG from sale of residential property can be claimed as exemption from income tax, to the extent capital gains are being reinvested in “specified bonds” in India
Capital Gains Account Scheme has an option to deposit the amount of capital gains if LTCG remains uninvested by the due date of filing India tax return (July 31) (not after the due date of filing India tax return) ) and subsequently withdraw this amount within the stipulated period (2 years / 3 years, as the case may be) for reinvestment in the new residential house.
If the entire amount is not reinvested or credited to the scheme, the remaining portion of the LTCG will be taxed.
Thus, part of your capital gains on sale of immovable property in India will be taxable in India if exemption from income tax is not claimed to the extent the capital gains are reinvested in India.
You cannot choose to pay tax in India or Australia. If you qualify as a resident of Australia and if such income from the sale of immovable property is also taxable in Australia, you may claim the Foreign Tax Credit in Australia for taxes paid in India in accordance with the applicable provisions of double tax. can claim. Taxation Avoidance Agreement (DTAA) between India and Australia.
Tax on LTCG can be paid either as advance tax in four installments (15% by 15 June, 45% by 15 September, 75% by 15 December and 100% by 15 March) or before filing of tax return Self assessment tax with interest till 31st July
If the buyer of the residential property does not deduct the full tax payable by you, the need to pay advance/self-assessment tax will arise.
Sonu Iyer is EY India’s Tax Partner and People Advisory Services Leader.