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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