Tax on Income from Immovable Property
According to the general permission granted by the Government of India, NRIs, PIOs and OCIs do not have to pay any taxes when they are acquiring property in India. But if they are selling this property, they will have to pay Long Term or Short Term Capital Gains Tax. Also, any rent collected from the property is taxable, and the owner will have to obtain a PAN card and file their income tax returns.
Capital Gains Tax
Capital Gains Tax is the tax attracted on the profit made from a real estate transaction. There are two types of Capital Gains Tax, categorized based on how long the property was owned.
Short Term Capital Gains (STCG)
If the investor purchases a property and sells it within 36 months, the profit gained is called Short Term Capital Gains. It is calculated as the difference between the cost price and selling price of the property. The short term capital gain will be directly added to the investor’s income and he will be taxed based on the income slab in which he falls.
Long Term Capital Gains (LTCG)
If the investor purchases a property and sells it after 36 months, the profit gained is called Long Term Capital Gains. The income tax on long term capital gains is calculated at a flat rate 20%, irrespective of the investor’s income.
Any NRI, OCI or PIO has to file their income tax returns if their taxable rental income in India for the financial year is above the basic exemption limit. They also have to file their income tax returns if they have earned short-term or long-term capital gains from the sale of any of their investments or assets, even if the gains are less than the basic exemption limit.
They can also file tax returns to claim a tax refund if the tax deducted at source is more than the actual tax liability. They can also claim a tax refund if they have given to tax-deductible charities, invested in certain tax-deductible savings schemes, or undertaken a home loan.
Tax Benefits Available on Repayment of Home Loans
According to section 24 of the Income Tax Act, the interest on a home loan is deductible from the income gained from house property to the extent of Rs 1.5 lakh per annum. Moreover, up to Rs 1 lakh of the principal repayment can be deducted under section 80C (subject to an overall limit of Rs 1 lakh of that section).