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INDIANPIO Jan 22nd, 2012 12:37

Capital gains -Selling land in Delhi
 
Hello,

I am a US Citizen and I bought a piece of Land in Delhi in 1992 when I had a US green card. I want to sell that land and buy a flat in Delhi with the proceeds. I have narrowed down a flat which will cost approximately the money I get from selling my land. My question is related to the tax I would have to pay in India and USA.

1)From what I have read I shouldn't have to pay any capital gains tax in India since I am investing all the money in a flat in India? Am I correct? Will I still have to file any tax returns in India (Income Tax or Capital gains tax).

2)What about the USA? Will I have to pay capital gains tax here?

Replies from anyone who has any experience in this will be greatly appreciated.

rajatsurey Jan 22nd, 2012 23:58

I am not an expert and you need to consult a chartered accountant or a tax consultant. I can share with you some general knowledge of the matter, capital gains applied in a new property is not taxable if the first property has been held for atleast 3 years. You need to ask a CA, two questions:

1. Does land qualify as property in this context?
2. Is this rule applicable to NRIs?

If no tax is payable, you may not need to file a tax return - but do re-check please.

rajatsurey Jan 23rd, 2012 00:00

For US taxation, I am even less qualified, but my former boss was a US citizen and I believe any overseas income of a US citizen is taxed in US (that is if one chooses to show it - as there will be no cash inflow).

wonderwomanusa Jan 23rd, 2012 00:55

I am an American tax professional. As a US citizen, you should be reporting your world-wide income. If you sell land in India, yes, you will be subject to capital gains tax. If you also pay tax on this sale in India, then the US will give you a foreign tax credit on the double-taxed income. You will definitely want to talk about this with a tax professional.

INDIANPIO Jan 26th, 2012 12:09

Thank you for your replies. Other than the tax paid in India are there any other dedeuctions I could take?

professorm Jan 26th, 2012 13:20

Failure to pay US tax on capital gains may land you in serious trouble. All capital gains must be reported and taxes paid.

nycank Jan 26th, 2012 14:05

Quote:

Originally Posted by INDIANPIO (Post 1336704)
Thank you for your replies. Other than the tax paid in India are there any other dedeuctions I could take?

You have to report all world-wide income as WWU mentioned. I think a new form has introduced last year a consolidated 89something that my accountant had me sign..

Quote:

Originally Posted by wonderwomanusa (Post 1334365)
You will definitely want to talk about this with a tax professional.

Or Mitt Romney :) [Just kidding]

nycank Jan 26th, 2012 14:14

Sorry 8949 does not apply to you.

INDIANPIO Jan 28th, 2012 08:17

Quote:

Originally Posted by rajatsurey (Post 1334327)
1. Does land qualify as property in this context?
2. Is this rule applicable to NRIs?

1) From what I have read according to Sec.54 I think residential land qualifies for a like exchange with residential apartment in India and I shouldn't have to pay any tax.

2)I didn't see anything seperate for NRI's other than repatriation of money which I am not concerned with at the moment.

It's hard to find a good resource in the US who knows both India and US laws.

INDIANPIO Jan 28th, 2012 08:23

Quote:

Originally Posted by wonderwomanusa (Post 1334365)
I am an American tax professional. As a US citizen, you should be reporting your world-wide income. If you sell land in India, yes, you will be subject to capital gains tax. If you also pay tax on this sale in India, then the US will give you a foreign tax credit on the double-taxed income. You will definitely want to talk about this with a tax professional.

I am still trying to figure out if I have to pay tax in India and if Sec 54 applies to me because I want to sell land and buy an apartment. If it does then I don't have pay any taxes in India and only in the US. <br/>
But in case I have to pay tax in India is it straight foward to get a foreigh tax credit in the US or are there a bunch of loopholes. I am a little scared that I might wind up paying double the taxes - i.e. I pay in capital gains tax in India and the US won't give me foreign tax credit for it for some reason.

capt_mahajan Jan 28th, 2012 09:05

HDFC realty- where I will quote from- is a subsidiary of HDFC. I will be surprised if their information is incorrect, although the OP needs to consult a professional:


Note that they are talking about NRIs in that entire page. And, bold mine.

Under
Repatriation of sale proceeds of residential / commercial property purchased by NRI / PIO

Quote:

Q Are there any provisions to avoid tax on capital gains from immovable properties?

A. Provisions exist for exemption of tax liability arising from Long-term capital gains if the amount of such gains is utilized for investment in specified assets. Such specified investments are –
(i) Gains from a residential house Investment in another residential house one year before or two years after the transfer. In case the residential property is proposed to be constructed, it can be done within 3 years of the transfer.
(ii) Gains from assets other than residential house e.g. commercial property or land etc. Investment in residential house within one year before or two years after (if purchased) and 3 years after (if constructed) provided the assessee does not have more than one residential house already.
(iii) Gains from any immovable property In Bonds issued by Rural Electrification Corporation or National Highway Authority of India within 6 months of the transfer.
On investment in the manner aforesaid the gains are not subjected to tax but if the new asset is transferred without holding it for 3 years, the exemption granted is withdrawn and taxed as short-term gain.
http://www.hdfcrealty.com/faqs/faqs.asp#


Not an expert, but it appears that these rules are the same for resident Indians and NRIs.

INDIANPIO Jan 29th, 2012 09:53

Thanks for your reply. I am pretty sure I would not have to pay tax in India, only in US. What about
wealth tax? Would I have to pay any wealth tax in India?

a_f_d Feb 15th, 2012 00:27

Quote:

Originally Posted by INDIANPIO (Post 1338507)
Thanks for your reply. I am pretty sure I would not have to pay tax in India, only in US. What about
wealth tax? Would I have to pay any wealth tax in India?

think wealth tax has been abolished - but check.
The point about investing capital gains in an exempt property/ bond is that the gain has then not been realised. I assume US tax is on realized gains?

AndyD 8-)#


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