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Possible tax saving options for NRI selling property in Bangalore

Here is a live case! I just finished a call with Mr.Amar, an NRI staying in USA. I understood from him that he has a flat in Koramangala, which was bought in 2011 for Rs.80 Lakhs which he now intends to sell for 1.52 Crores.

Our talk went as under –

Q: If I sell the property, should I pay any taxes in India?

A: Yes, you have held the flat for over 3 years and hence, you have to pay Long Term Capital Gain (LTCG) at the rate of 20.6%

Q: Oh! That seems to be a big tax outflow. I want this money in USA to buy a house. Can I get tax exemption for re-investment in a house?

A: No. However, if you buy a house or flat in India, you are eligible for tax benefit

Q: Apart from reinvesting in a house in India, is there any other tax saving options?

A: Yes; you can invest upto Rs.50 Lakhs in Capital Gain bonds.

Q: If I decide to buy a house in India, this may take time. Till such time, can I park the money in NRO account?

A: If you are not investing the money in house on or before filing the Income Tax Return, you have to park the money (equal to capital gains) in a specified account called ‘Capital Gain Account Scheme (CGAS).

Q: Are you sure that NRI can invest in CGAS?

A: Yes; NRI can invest both in Capital Gains Bond as well as Capital Gain Account Scheme. Investment in Capital Gains Bond should be done within 6 months from the date of sale of the property; whereas deposit in CGAS can be done on or before filing Income Tax return.

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CA Prasad Chartered Accountant
CA Prasad is a practicing Chartered Accountant and partner in Bangalore -based CA Firm. For further information or query, please email it to [email protected]