Investing in foreign real estate can be fascinating, but it also comes with rules, particularly regarding capital gains tax on foreign property.
If you are an Indian national selling real estate overseas, you should know how taxes treat your earnings.
Tax on Capital Gains:
A capital gain is the additional money you make when you sell a house for more than you paid for.
In India, this increase is taxed under capital gains tax.
Do Indians pay taxes on overseas real estate?
Sure.
Should you be an Indian resident seeking tax benefits, you have to report and pay taxes on your worldwide income.
Capital gains tax on foreign property is included in this.
Types of Capital Gains
Short-term Capital Gains (STCG)
Should you sell the house two years following purchase.
Long-term capital gains (LTCG)
Are what result from selling the property following more than two years of ownership.
Taxes Rates
Added to your income, STCG is taxed according to your slab.
LTCG is taxed at twenty percent with indexation benefit.
Value of Indexation
Based on inflation, indexation helps modify the purchase price of your house.
This raises the cost of acquisition, so lowering your capital gains tax on foreign property.
Two Taxation Avoidance
India maintains agreements with several nations to prevent double taxation.
You might thus get credit for tax paid on the property in that nation in India even if you already paid taxes on it.
Key Notes to Remember
- Report the sale always on your Indian income tax return.
- Save paperwork including purchase agreements, sale deeds, and evidence of expenses.
- Should you be claiming tax credit for paid foreign taxes, use Form 67.
Typical Mistakes to Avoid
- Not reporting foreign income in ITR.
- Not accurately converting sales amount to INR.
- Not filing taxes by the deadlines.
Advice Notes
- If you doubt tax rules, see a CA.
- Track rates of currency exchange for correct reporting.
- Safely save all pertinent records.
