Taxation of LTCG for non residents post amendments by Finance Act 2024:

 

1.  Under the Finance Act 2024, significant changes have been introduced concerning long-term capital gains (LTCG) for non-residents, effective from July 23, 2024.

 

2.  Tax Rate:
The LTCG tax rate for non-residents has been standardized at 12.5% across all asset classes. This represents a reduction from the previous 20% rate, but it comes with the caveat that the benefit of indexation, which was previously allowed taxpayers to adjust the purchase price of an asset for inflation, has been completely removed for non residents. The option/ choice of earlier regime of 20% tax rate with indexation benefit in respect of assets acquired prior to 23rd July 2024 is not available to NRI and is restricted for residents only.

 

3.  Holding Period:
The holding period to qualify for LTCG status has been simplified. For most assets, the required holding period is now 24 months. However, for listed securities, the holding period remains 12 months.

 

4.  Impact of Indexation Removal:
This reduction in tax and thus TDS rate can be beneficial for NRIs as it decreases the immediate tax outflow and potentially avoids having a significant amount of the sale proceeds blocked as TDS.

 

5.  Lower deduction certificate:
NRIs can still apply for a lower TDS certificate from the Income Tax Department to ensure that TDS is deducted only on the actual capital gains rather than the total sale consideration.