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Long Term Capital Gains for NRI

prasath (audit assistant) (56 Points)

12 May 2011

Dear all,

Please clarify the following:

An Indian Citizen settled abroad,i.e. Non resident Indian (got citizenship of the foreign country) has sold his house property in India.

How the capital gains should be taxed in the hands of NRI.

Whether Indexation Benefit is available or not.

At what rate the capital gains should be taxed.

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8 Replies

ketan (Chartered Accountants) (29 Points)
Replied 20 May 2011

as per sec 48 indexation benefit not available to NR for transfer of Debenture and Securities

hence in ur case house property transfered eligible for indexation

tax will be @ 20%

Chetan Khadria (ca) (21 Points)
Replied 22 June 2013

in my opinion Indexation benefit is not available for NRI read section 115D. This section clarify that no basic exemption limit and indexation benefit available for NRI.

Amber Jain (Article Assistant) (206 Points)
Replied 22 June 2013

Dear Prasath,

As per the Second Proviso to Sec 48 of computation of capital gain where long-term capital gain arises from the transfer of a long-term capital asset then the benefit of indexation is not available both in case of Cost of Acquisition & Cost of improvement.

So in your case the indexation benefit on sale of property will not be available.

shivam gupta (Student) (142 Points)
Replied 22 June 2013

Dear Amber

First Proviso of 48 is applicable only on transfer of Investment in Shares & debteures of an Indian Co. by a Non resisdent of India.

so indexation on COA & COI will be available.

Go and have a good look on second proviso of Sec 48

Amber Jain (Article Assistant) (206 Points)
Replied 22 June 2013

Dear Shivam,

Investment in shares & debentures are covered by first proviso to Sec 48 but regarding long term capital asset it's is defined second provisio to sec 48

shivam gupta (Student) (142 Points)
Replied 22 June 2013

Dear Chetan Sir,

Chapter XII-A deals with the special provision regarding Taxon Non -Resident. A NRI may at the option can adopt for this scheme. As per Sec 115I an assessee even after adoption for such special provision can withdraw himself from the special provision. so the section 115D is not just option, if assessee doed not apdop special provision then the he can have the benefit for Indexation (Subject to second proviso of Sec 48)

shivam gupta (Student) (142 Points)
Replied 22 June 2013

I forgot to mention first proviso, sorry for that, now i modiified that.

Dear Amber.

Sec 48 provides method of Computation of Capital Gain only. Sec 48 does not deal with the Indexation so computation will be done as follows u/s 48

Sales Consideration xx

- COA (xx)

- COI (xx)

- Expenses towards trasnfer (xx)

Proviso to any section means exception to the section regarding which proviso is given under the Act. so it basically means where normal method of computation does not work.

Now read second proviso i.e exception of Section 48.

K.T.Antony (Chartered Accountant) (68 Points)
Replied 23 June 2013

Chapter XIIA is optional to NRI as per section 115-I. Indexation is denied to a Foreign Exchange Asset ie. asset acquired out of foreign exchange. If the asset is ancestral property, then indexation is available.