Being a non-resident Indian or NRI, you are eligible for certain tax exemptions from your income generated from sources in India, including property. Here are three Income-Tax exemptions that you need to be aware of:
Section 54
This section stipulates that if NRI sells a residential property after three years from the date of purchase and reinvest the proceeds into another residential property within two years from the date of sale, the profit generated is exempt to the extent of the cost of a new property. The exemption is limited to purchase of only one residential property from capital gains. The amount invested in buying such property may be higher than the capital gains, but the exemption is available only for the long-term. Also, you can claim this exemption on property purchased before one year of getting long-term capital from the sale of a property.
Section 54 F
It is available when there is a long-term capital gain on the sale of any capital asset other than a residential house property. To claim this exemption, the NRI has to purchase one house property, within one year before the date of transfer or 2 years after the date of transfer or construct one house property within 3 years after the date of transfer of the capital asset. This new house property must be situated in India and should not be sold within 3 years of its purchase or construction. Also, the NRI should not own more than one house property (besides the new house) and nor should the NRI purchase within 2 years or construct within 3 years any other residential house.
Section 54 EC
An exemption is available under this section. Investing in certain bonds also exempts you from tax on your long-term capital gains. Bonds issued by the National Highway Authority of India (NHAI) or Rural Electrification Corporation (REC) have been specified for this purpose. These are redeemable after 3 years and must not be sold before the lapse of 3 years from the date of sale of the house property. To avail an exemption, you have to buy these bonds within six months of selling a property in India. Also, the maximum amount of investment in these bonds is fixed at Rs 50 lakh.
Please note that none of the above tax exemptions is available for buying an asset outside India.
The information provided in this article is generic in nature and for informational purposes only. It is in no manner can act as a substitute for specific advice in your own circumstances. We strongly recommend you to seek professional guidance pertaining to your query or doubt.
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India is a vast country and a mystery to most. Those who live in it, those who now live outside of India or those who are just visiting. We, at NRIClub™, serve as a centralized hub of information for the residents, non-residents and travellers who are not familiar with various aspects of this great country.
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