Income Tax implication on sale/transfer of property by OCI Card Holder

Income Tax Income from Other Sources
1

Hi Team,

My brother recently took OCI card (Acquired citizenship of other country). I had bought the flat 10 years back.
My question is what is the tax implication

  1. If is sells the property ?
  2. If he gifts to his mother (who is a ordinary citizen)

Thanks,

2

@Saad_C @TeamQuicko could you plese help

3

Hi @Alex ,

Any property situated in India which is transferred shall give rise to Capital Gains irrespective of whether the person is Resident or Non-Resident.

  1. If the flat is sold which is acquired 10 years back, then it shall be a Long Term Capital Asset and Long Term Capital Gain/Long Term Capital Loss shall be calculated accordingly.

When an NRI gives gifts in the form of cash, cheque, items, or property to a Resident Indian who is a relative, both giver and receiver are exempt from tax in India.

  1. If the flat is gifted to his mother, then it shall be considered as a transfer to relative which is exempt from tax so there will be no capital gain implications.

You may refer the below guide on classification, calculations of Capital Gains arising from transfer of capital assets.

4

We 3 siblings (2 brothers, 1 sister) are 3 joint account holders of a demat account with the 1st holder a US citizen with OCI and the remaining 2 account holders resident Indians. The demat account is linked to a joint bank account in the same 3 names, with the same first holder (US citizen with OCI). The demat account contains shares transferred after the deaths of our parents (through transmission, after obtaining necessary court documents) as we are the only 3 legal heirs. Each of us 3 owns 1/3rd of the shares in the joint demat account. As soon as possible, we wish to sell 1/3rd of the shares, transfer the proceeds to a US bank account of the first holder and transfer the remaining 2/3rd of the shares (1/3rd each) to the individual demat accounts of the remaining 2 holders in India. What is the most tax efficient way, assuming the total value of shares is 10 lakhs, between 10 and 20 lakhs or above 20 lakhs?

5

Hey @Adrian_212 ,

Any capital asset received from relatives or through inheritance is exempt as and when received. Here, shares are transferred after the death of parents and hence, said shares are received through inheritance process.

If, you sale the said shares in market and then only capital gain tax will be applicable. Here, one account contains OCI status out of three joint demat account holders. Hence, capital gain tax treatment should be followed considering the residential status first at the time of selling of shares.

You can also read below article for more insights about the tax treatment:

I hope, it helps! :slightly_smiling_face:

6

Thank you Nireka and Kaushal!

Not sure what you meant by
“Hence, capital gain tax treatment should be followed considering the residential status first at the time of selling of shares.” Could you please advise on how this can be done to minimise tax? Could the 1st holder (US citizen/OCI holder) gift his 1/3rd of shares to either of the other 2 holders (sister or brother) in India and an equivalent amount of money be transferred to his US/India bank account?