NRI has the following options to claim exemption of LTCG
tax on sale of residential house which is held for more than two years.
in a residential house:
i. At present, NRI can avail
exemption if long term capital gains arising on sale of a residential property
are re-invested in one residential house property. The Government has extended
the said benefit of re-investment to two residential properties, effective from
AY 2020-21 i.e. from FY 2019-20 onwards.
ii. The aforesaid benefit can
be exercised only when the capital gains on sale of residential property does not exceed Rs. 2 crore. It is
pertinent to note that the benefit of this provision can be availed, at the
option of the person only once in
iii. The exemption can be
availed if a new residential house was purchased one year before the date of
sale of the old residential house
(i.e. by September 2, 2019), or purchases a new residential house within a period
of two years from the date of sale of the old
residential house (i.e. before August 31, 2022), or, construct a new
residential house within a period of three years from the date of sale of the
old residential house (i.e. on or before August 31, 2023).
iv. If NRI has not purchased/constructed the new
residential house before July 31, 2021 (i.e. due-date for filing tax return for
the year in which the old residential house is sold), and he would like to
claim tax exemption then he has to open a banking a/c under the ‘Capital Gains
Account Scheme’ (CGAS) with a Nationalized Bank and deposit the amount of
Capital Gains and utilize the said deposits for purchasing/construction of the
new residential house within the time lines prescribed above. However, if the amount deposited in CGAS is not utilized
wholly or partly in purchasing/construction of the new residential house
property within the time lines prescribed in paragraph 1(iii) above, then such
unutilized amount would be subject to LTCG tax in the 3rd year from
the date of transfer of old property.
v. Having obtained the tax
exemption as above he must hold the
new residential house for at least a period of 3 years from the date of its
purchase/construction as otherwise he may lose the Tax exemption. If the same
is sold before 3 years, while computing Capital Gains from sale of the said new residential house, the cost
of acquisition of the new residential house shall be reduced by the amount of
exemption claimed and thereby resulting into higher capital gains amount subject
Invest in Specified bonds:
i. NRI can reinvest the amount of LTCG
arising on sale of residential house in Tax saving bond issued by :
a. National Highways Authority of India (NHAI)
b. Rural Electrification Corporation Ltd (REC)
c. Bonds as may be notified by the Central Government. (No bonds are notified by Central Government till date)
ii. Investment is to be made in the above specified bonds within 6 months from the date of sale of the property.
iii. He investment in
specified bonds should not exceed Rs. 50 lakhs and NRI is
required to hold the specified bonds for a period of five years. However, if the same is transferred or converted into money within 5
years then exempted capital gains will be taxable in year of ‘’transfer/conversion’’ of such
iv. Further, any borrowings
against security of these bonds shall tantamount to ‘’conversion/transfer’’ of such specified bonds into money.
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 consideration
received on sale of residential house.
ii. There are several conditions
to be complied with in order to claim this reinvestment exemption.
in units of specified fund:
i. The Government has provided for an additional amount of exemption of Rs. 50 lakhs that may be
invested in the units of specified fund. However, no such specified fund has
been notified till date