Tax Questions on Property in Chennai

Kostas · May 3rd, 2008, 07:08

Hello all,

I came across this forum from a google search and I have a question I hope you can help me with.

I am an American citizen and my wife is an Indian citizen who is a permanent resident.

We were married in the US and Chennai in 2007.

We just got back from our 2nd trip to Chennai where we received a gift of 5 grounds of land in Panayur.

We plan to build us a house and then rent out the property and put the rental income into an NRO account over there.

We plan to keep the property for quite some time, but I'm curious as to the tax obligations for both India and the US for when we decide to sell. This property is currently worth quite a bit of money and who knows what it'll be in 10-20 years but will we have to pay taxes to both governments?

Any assistance would be appreciated.

Thanks.

-Kostas

capt_mahajan · May 3rd, 2008, 07:54

Can't speak for US taxes or any tax treaties.

In India, an Indian resident pays the following taxes wrt property/rentals

- property tax, annual, varies Statewise
-Income tax on rented property, after some allowable deduction for maintenance.
- Capital gains tax if the property is sold.

In your case, the interest earned on an NRO account is taxable.

Non residents pay Indian income tax on Indian income; they are even obliged to pay income tax on world income if they become resident of India (under the income tax laws, which are determined by length of stay in India) in a financial year (1 Apr to 31 March)

In the second case, tax treaties notwithstanding , of course.

Nick-H · May 3rd, 2008, 08:07

Lucky Man

Seriously suggest that you need the advice of a qualified auditor here, and sooner rather than later as sometimes these things can be affected by how you set stuff up at the beginning.

Don't go for ideas on an internet forum: go for a professional!

Otherwise, welcome to the site, I'm sure you'll find much else here interesting!

<cross-posted with the Captain, whose ideas ---err, knowledge on this stuff is pretty good>

wonderwomanusa · May 3rd, 2008, 08:24

US taxes: Citizens and residents (green card) are required to declare their world-wide income. The rental may actually help your US taxes. When you sell, you'l lbe subject to tax, of course, but you will not be double taxed at that time or along the way: foreign taxes paid are eligible for the Foreign Tax Credit.

You'll want to see a local Enrolled Agent or CPA about this BEFORE YOU DO ANYTHING.

capt_mahajan · May 3rd, 2008, 08:49

To add to my previous post, in some cases you may have to pay 'wealth tax' on property and deposits in India, too- specially residential property in certain areas which is not let.

PS: found this link

http://incometaxindia.gov.in/wealth%20tax%20act.asp

bearable · May 3rd, 2008, 09:15

Here is another link:

http://www.rbi.org.in/scripts/FAQView.aspx?Id=33

May 3rd, 2008, 07:08	#1
Kostas Account Closed Join Date: May 2008 Location: Mississippi, USA Posts: 1	Tax Questions on Property in Chennai Hello all, I came across this forum from a google search and I have a question I hope you can help me with. I am an American citizen and my wife is an Indian citizen who is a permanent resident. We were married in the US and Chennai in 2007. We just got back from our 2nd trip to Chennai where we received a gift of 5 grounds of land in Panayur. We plan to build us a house and then rent out the property and put the rental income into an NRO account over there. We plan to keep the property for quite some time, but I'm curious as to the tax obligations for both India and the US for when we decide to sell. This property is currently worth quite a bit of money and who knows what it'll be in 10-20 years but will we have to pay taxes to both governments? Any assistance would be appreciated. Thanks. -Kostas

May 3rd, 2008, 08:07	#3
Nick-H Loud-mouthed, Noisy Bird Join Date: Oct 2004 Location: Chennai, India Posts: 26,902	Lucky Man Seriously suggest that you need the advice of a qualified auditor here, and sooner rather than later as sometimes these things can be affected by how you set stuff up at the beginning. Don't go for ideas on an internet forum: go for a professional! Otherwise, welcome to the site, I'm sure you'll find much else here interesting! <cross-posted with the Captain, whose ideas ---err, knowledge on this stuff is pretty good> __________________ . Just one member of the IndiaMike Mod Team

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May 3rd, 2008, 07:54	#2
capt_mahajan (in charge of navel affairs) Join Date: Sep 2005 Location: India Posts: 10,113	Can't speak for US taxes or any tax treaties. In India, an Indian resident pays the following taxes wrt property/rentals - property tax, annual, varies Statewise -Income tax on rented property, after some allowable deduction for maintenance. - Capital gains tax if the property is sold. In your case, the interest earned on an NRO account is taxable. Non residents pay Indian income tax on Indian income; they are even obliged to pay income tax on world income if they become resident of India (under the income tax laws, which are determined by length of stay in India) in a financial year (1 Apr to 31 March) In the second case, tax treaties notwithstanding , of course.

May 3rd, 2008, 08:24	#4
wonderwomanusa Maha Guru Member Join Date: May 2003 Location: Northern California Posts: 3,522	US taxes: Citizens and residents (green card) are required to declare their world-wide income. The rental may actually help your US taxes. When you sell, you'l lbe subject to tax, of course, but you will not be double taxed at that time or along the way: foreign taxes paid are eligible for the Foreign Tax Credit. You'll want to see a local Enrolled Agent or CPA about this BEFORE YOU DO ANYTHING.

May 3rd, 2008, 08:49	#5
capt_mahajan (in charge of navel affairs) Join Date: Sep 2005 Location: India Posts: 10,113	To add to my previous post, in some cases you may have to pay 'wealth tax' on property and deposits in India, too- specially residential property in certain areas which is not let. PS: found this link http://incometaxindia.gov.in/wealth%20tax%20act.asp

May 3rd, 2008, 09:15	#6
bearable Member Join Date: Sep 2004 Location: San Jose Posts: 44	Here is another link: http://www.rbi.org.in/scripts/FAQView.aspx?Id=33

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