Invest in India to get capital gain exemption.


investment in India

Query 1]

  1. My son is settle in London. He is having a plot in Nagpur, which he now wants to sell. The plot is of Rs. 20 lakhs, If sold, it will fetch around Rs. 50 Lacs. He wants to utilize this money for purchasing a house in London. Can he take this money to London and secondly what will be the tax liability? What could be tax saving option?
  2. I have a house in my name at Nagpur. I want to transfer this to my son, who is settle in London. He wants to purchase a residential house at London. Can he sells this house and utilize the money to purchase the house there? The selling price of the house is nearly rupees one crore). What will be the tax liabilities on him? []


With the advent of globalization, more & more Indians are settling abroad. This has resulted in multifold increase in cross border transactions & has resulted in increasing volume of inward & outward remittances. Issues rais by you is covered hereunder. The same may be beneficial to other readers as well who are planning to dispose off the property likewise in India.
  1. Taxability on sale of Property in India:
    Any income accruing or arising in India is taxable in India. Further, any income from transfer of any assets located in India is also taxable in India. If the property is sell by NRI after a period of 36 months from the date of purchase, the income would be taxable as Long Term Capital Gain (LTCG) @ 20%. NRI are also eligible for indexation benefit while computing capital gain if the asset is sell after a holding period of more than 36 months. If however the property is sell within 36 months of its purchase then income would be treat as Short Term Capital Gains (STCG) & would be taxable as per applicable tax slab. STCG is calculated as the difference between the sale value and the cost of purchase (no indexation benefit is available). In nutshell, any gain arising to your son would be taxable in India. You can gift your residential house property to your son. The transaction of gift would not be subject to income tax in India. However, whenever your son sell the property, he would be liable for capital gain tax in the same way as you would have been liable if the property were sold by you. investment in India
  2. Tax Exemption:
    An individual (whether resident or non-resident) can save LTCG arising from transfer of plot or house by claiming an exemption u/s 54 or u/s 54F or U/s 54EC, as under:
    i) Exemption Under Section 54 or 54F:
    Against LTCG arising on transfer of plot, exemption can be claimed u/s 54F. For claiming an exemption, subject to various other terms / stipulations, NRI have to invest the amount of net sale consideration for purchase of a residential house property in India within a prescribed period.
    Similarly, against LTCG arising on transfer of house property, exemption can be claimed u/s 54. For claiming an exemption, subject to various other terms / stipulations, NRI have to invest the amount of LTCG for purchase of a residential house property in India within a prescribed period. investment in India
    An important question in your query is whether LTCG exemption is available if NRI invests the amount for purchase of a residential house property outside India? The issue has now been settle by the Finance Act-2014 which have specifically provide for exemption only for purchase of a residential house property situate within India. To get an exemption, “invest in India” is the only mantra. Your son would not get exemption against investment in a house property in London.    investment in India
  3. ii] Exemption Under Section 54EC:
    To save tax u/s 54EC, NRI have to invest the amount of LTCG in the Specified bonds REC/ NHAI within a period of 6 months from the date of transfer. However, there is a maximum investment ceiling of Rs. 50 Lacs for investment in 54EC Bonds. Effectively, LTCG up to Rs. 50 Lacs only can be save u/s 54EC.
  4. Remittances of fund by NRI:
    Income tax Act don’t places any bar on remittances of the fund. The same is governe by Foreign Exchange Management Act (FEMA). Under FEMA, general permission has been grant to NRIs to repatriate up to $1 million per financial year out of the balance lying in the non-resident ordinary account or out of the sales proceeds of Indian assets acquire by way of purchase, gift or inheritance. This is subject to obtaining a certificate from a chartered accountant in Form 15CB certifying that due income tax has been pay. The above limit does not apply to proceeds from residential property acquire through foreign funds to the extent of the foreign currency equivalent to the initial investment & subject to remittance of sales proceeds of two residential properties. These provisions are in accordance to the general permission grant under the FEMA guidelines; specific approval for remittance over limits mentioned above can always be sort from the Reserve Bank of India.

Query 2]

I have taken an education loan during 2009-10 of Rs. 3 Lacs in my name in which I have paid Rs. 90 thousand till now. What is the income tax benefit on the education loan? I want to know whether the former government has introduced any circular during the year for the subsidy of education loan or interest thereon? If it is, then what will be the terms & condition to avail that facility. Please guide me. []


Education loan offers a tax benefit U/s 80E of the Income Tax Act-1961. The benefit is available in respect of loan taken for higher education & is available only to an Individual who has taken the loan and not to any other person. The deduction would be admissible only if the loan is availed from the specified financial institution or approved charitable institution for the higher education of self or specified relatives. In short, no deduction U/s 80E shall be available in respect of loan taken by an employee from employee co-operative society or from private sources. [Financial institution, for the purpose, means a banking company to which the Banking Regulation Act, 1949 applies (including any bank or banking institution referred to in section 51 of that Act); or any other financial institution which the Central Government may, by notification in the Official Gazette, specify in this behalf. HDFC Ltd & Credila Financial services private limited are notified financial institution for the purpose of section 80E].
The higher education means any course of study pursued after passing senior secondary examination or its equivalent from any school, board or university recognized by the Central Government or State Government or local authority or by any other authorized authority. “Relative” for the purpose of deduction means spouse & children of that individual. Even legal guardian of student can claim the deduction u/s 80E. If all above conditions are satisfy, entire amount of interest pay would be available as deduction. The deduction would be available from the year in which individual starts paying the interest and seven subsequent assessment years. There is no upper ceiling or cap for claiming interest amount as deduction. No deduction towards the repayment of the principal portion of the loan is available as deduction.
The government of India has introduced the Central Scheme for Interest Subsidy (CSIS) in respect of educational loan disbursed after 01.04.2009 under which government took over the burden of interest for the duration of period of study plus one year or six months after getting the employment, whichever is earlier. The benefit of the scheme is available only in respect of loan sanctioned/availed up to 31.03.2009 & outstanding as on 31.12.2013 & is available only to students who are belonging to economically weaker sections with an annual gross parental/family income upper limit of Rs. 4.50 Lacs p.a. as on the date of availing the loan.
Deduction u/s 80E is available only in respect of interest pay. No deduction would be admissible towards interest subsidy offer by the government as discuss above.
investment in India

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