NRI has the following options to claim complete exemption of capital gains arising on sale of his residential house, provided the house that was sold was a Long Term Capital Asset:
1. Reinvest in another residential house:
• NRI can avail the exemption if the new residential house was purchased one year before the date of transfer.
• NRI needs to purchase one RESIDENTIAL house in India within a period of two years from the date of sale of the old residential house (i.e. before August 31, 2018), or,
• NRI can construct one RESIDENTIAL house in India within a period of three years from the date of sale of old residential house (i.e. on or before August 31, 2019).
• If NRI has not purchased/constructed the new RESIDENTIAL house before July 31, 2017 (i.e. due-date for filing tax return for the year in which the old residential house is sold), then he will have to open an account under the ‘Capital Gains Account Scheme’ with a Nationalized Bank and deposit the amount of capital gains. He needs to then utilize the amount out of this account for purchasing/constructing the new residential house within the time lines prescribed above.
2. Invest in Specified bonds:
• NRI can reinvest the amount of capital gains arising on sale of old residential house in specified bonds within 6 months from the date of sale of old residential house
• Such amount of investment in specified bonds should not exceed Rs. 50 lakhs in the current as well as subsequent financial year. Lock-in period of such specified bonds is ‘3’ years.
• Further, the government has notified that an additional amount of Rs. 50 lakhs may be invested in a ‘long-term specified asset’, to avail an exemption for the same. However, no such ‘long-term specified asset’ has been notified till date.
3. Investment in equity shares of a new eligible Indian company:
• NRI will be eligible to claim exemption in proportion of amount reinvested in equity shares of a new eligible Indian company or eligible start-up (as defined in Section 54GB of the Act) to the sales proceeds received on sale of residential property.
• There will also be further conditions to be complied with in order to claim this reinvestment exemption.