Tax on Capital Gains earned by NRI

If the income accrued in India from sources such as capital gains from investments in stocks, mutual funds, property rental, and term deposits exceeds the basic exemption limit as defined in the income tax Act, an NRI would have to file an income tax return.

The first and foremost point to be considered is, that, individuals must specify their Residential Status while filing their ITR.

Your residential status in India is determined by your period of stay in the given financial year. If you claim the status as an Indian resident, then, are required to pay tax on your global income, whereas non-residents are only taxed on income earned in India.

Taxability on Income from capital gains:

The capital gains tax provisions for NRIs are similar to those for the resident individuals except for the applicability of TDS provisions. Similarly to resident investors, the tax on capital gains for NRIs also depends on the holding period and the type of investments sold.

Capital assets like house property, shares, securities, gold, etc. If belong to India, then capital gain arising from the transfer of these capital assets shall be taxable in India only.

Capital gain on equity and related instruments by NRI

Let’s say you have units of equity-oriented funds and you plan to sell them. If you sold it after a holding period of more than 12 months then it is considered long-term capital gains Long Term Capital Gain Tax on Shares Section 112A - Learn by Quicko) (LTCG), which is taxable at 10%, exceeding Rs.1 lakh exemption and a securities transaction tax (STT) must be paid to sell these units. Remember that no indexation benefit on the cost of acquisition is allowed for equity-oriented investments.

Whereas, If the period of holding is 12 months or less on the sale date then it would be treated as short-term capital gains (STCG), which is taxed at a flat 15%.

Capital gain on unlisted shares and immovable property by NRI

If you hold any unlisted shares or immovable property and sell it after a holding period of 24 months would be considered LTCG, while less than 24 months is treated as STCG.

Here, LTCG is taxable at 20% with indexation. Indexation increases the cost of assets, taking inflation into account.

Whereas, STCG on these assets will be added to other taxable income and taxed as per individual slab rate. For instance, if a person is falling under the 30% bracket then would be taxed at the same.

Capital Gains on Debt-funds and other capital assets

For debt-oriented funds, if an individual holding for a period of more than 36 months is treated as LTCG and less than that is considered as STCG.

LTCG on these investments will be taxed at a rate of 20% with indexation, whereas, STCG would be taxed at an individual’s tax slab.

TDS applicable on LTCG and STCG

Particulars TDS on Long-Term Capital Gains TDS on Short-term Capital Gains
Equity 10% 15%
Non-Equity 20% 30%

And just like residents, the NRIs are also allowed to claim tax exemption under sections 54, 54EC, and 54F on the long term capital gains.

Which ITR Form should NRI fill out to report Capital Gains?

NRI receiving income from salary, capital gains, or other sources, other than business or profession is required to file Form ITR-2. The return must be filed by July 31st of the following financial year.

Hi All

First of all, I am very happy to find this forum which is filled with people having so much knowledge about tax regulations in india.
Kudos to all of you :blush:

I have Three questions , one related to Gift deed for NRI and other two related to LTCG. I own a property in India which I purchased in year 2006 at 45 lakhs.

(Ques # 1): Can an NRI like me gift this property in India to my mother? If yes, How is the cost of stamp duty calculated? Any tax implications for me as an NRI?

(Ques #2) : What should be LTCG if I sell it this year (2023) say for 1 crore? I found that CII for year 2006 is 122 and 2023 is 331. So is it
Indexed cost of acquisition = 4500000* (331/122)= 12209016
LTCG = 10000000-12209016= - 2209016
(In minus, I must be doing something wrong ? )

(Ques#3) : For claiming tax deduction under Section 54EC- Deduction on LTCG Through Capital Gain Bonds -I understand that only the profit and NOT the entire amount of sale is supposed to be invested in the bonds with a cap of upto 50 lakhs is that correct? Can someone please explain me that in above example what exactly should be the investment done under section 54EC to claim all the tax deduction?

@Shrutika_Shah : Would you be so kind to please have a look at my query?

Additionally- I see that you have answered a lot of queries over here. Are you based in Delhi? If we want to contact personally for the procedure related to selling of property in india, will you be able to help?

Hi @Sunil.Norge

Glad to hear your appreciation!

Here are the answers to your various questions.

  1. Yes, NRIs can gift/transfer any type of immovable property in India, whether the property is residential or commercial to their family as well as relatives, including mother.
    Gift received from NRI to a relative resident Indian is exempt from tax in India for both giver and receiver. When your mother sells this property at that time tax shall be applied to her.

  2. Your calculation for the LTCG if you sell the property in 2023 is correct. Since the cost of acquisition in 2023 is greater than the sale value, there is a loss. The minus amount shows a LTCL. LTCL can only be set off against LTCG. Also, when an NRI sells a property, the buyer is liable to deduct TDS @ 20% under section 194IA.

  3. Deduction u/s 54EC is also available to an NRI provided that the property sold is situated in India.
    The amount of deduction u/s 54EC is lower of the capital gains or cost of the new asset. Maximum up to ₹50 lakhs in a financial year.
    Since you’ve a loss, there is no point in claiming the deduction.

You can read more about Section 54EC of Income Tax Act on Sale of Land/Building- Learn by Quicko
NRIs can also claim the deduction u/s 54 and 54F

Hope this helps.

Hi @Sunil.Norge

You can Ask an Expert for any further guidance with your taxes.

1 Like

Hi Shrutika
Thanks. It seems you are a genius when it comes to Taxes.

Regarding the amount that must be invested for claiming under section 54E, what I understand from you is that one has to invest the same amount as that of of LTCG or total profit which ever is lower, up to max 50 lakhs in one financial year.
Is that correct ?

Secondly, do I need to fill the form for getting in touch with you personally? I would like to get in touch personally next time in Delhi/NCR when I come to india for these matters related to property. I am not sure where you are based.

1 Like

Hi @Sunil.Norge

Thanks for the cheers! Glad we’re able to help you with your tax related queries!

The amount of deduction u/s 54EC is lower of the capital gains (LTCG/profits) or cost of the new asset (bond price). Maximum up to ₹50 lakhs in a financial year.

Also, Quicko is an online tax planning and filing platform based out of Gujarat. You can get in touch with us online via Ask an Expert and get answers to all your queries.

Hope this helps!

1 Like

Hi @Shrutika_Shah

I also have a query related to NRI tax.

I moved out of India last year (2022) and have some money invested in equity and debt mutual funds. How much tax will I have to pay if I have LTCG of 2L from equity MF, 1L STCG each from stocks and debt MF. TIA !!

Thanks,
Abhishek

Hi @abhishek_gupta1

As per the income situation mentioned by you, the taxability shall be as follows:

  1. LTCG from listed equity MF (STT paid) = 10% (u/s 112 A) over and above 1,00,000.
  2. STCG from listed stocks = (STT paid) = 15% (u/s 111 A)
  3. STCG from listed debt MF = slab rate

Hope this helps.

@Shrutika_Shah - This was really helpful.

How will be my slab rate calculated in above example if I don’t have any other income.

Thanks

Hi @abhishek_gupta1

Glad I was able to answer you.

Here’s a read about Income Tax Slabs and Rates - Learn by Quicko for your reference.

@Shrutika_Shah - In my case will my taxable income be a sum of all the three incomes or just the income of the debt mutual fund as I had already paid tax on the other two instruments and in that case, since the income is less than 2.5L, I won’t have to pay any tax?

Hi @abhishek_gupta1

As per the information mentioned by you, your total income shall be the sum of all the incomes you’ve earned in a FY.
If you have already paid any taxes, you can claim them as tax credits while filing your ITR.

If the total income is less than 2.5 lakhs, no tax is payable.

@Shrutika_Shah
@Sakshi_Shah1
@Muskan_Balar

is this also applicable to the residents Indians or only to the NRIs ?
how can resident Indians , invest in this tax-free capital gains ?

Government exempts investment trusts, ETFs from capital gains tax in GIFT City | Tax: सरकार ने दी बड़ी राहत, यहां निवेश करने वालों को नहीं देना होगा कैपिटल गेन टैक्स | Hindi News, बिजनेस (india.com)

Hi,

I’m a non-resident Indian. I’m resident in a european country. I work in a US based company which gives us some stocks as well. Here in this european contry, if we declare ourself non-dom (non domiciiled), we don’t need to pay any capital gain made outside the country as long as we don’t bring that money back to this country. My stocks are in a US based company in a US broker account(e-trade). So, any capital gain will be outside of this european country. If I sell them and remit the money directly to my NRE account, I don’t need to pay capital gain tax in this european country as long as I’m not bringing that money back here. I want to know if I need to pay any tax in India for this money remitted to my NRE account?

Also, do we need to file ITR for the money we remit to NRE account?

Thanks,
Kapil.

Hey @kkg,

No, there will be no tax liability in India. Further, if there is no tax liability, filing the ITR is not mandatory.

Hi shruthika

I am an NRI from the UAE. I have investment in mutual fund and shares. My total indian income is below 2.5 lakhs. My indian income is only from sale of mutual fund and shares ie stcg and ltcg. Am I exempted from paying tax on these ltcg and stcg as my total income is below the 2.5 lakhs.

Thanks
Baiju

Hey @Baiju_K_Baby,

In the case of an NRI, the basic exemption is available only to income chargeable to the slab rate. Now, as long-term and short-term gains are chargeable to a special rate, the basic exemption is not available to NRIs. Hence, the same will be taxable.

Hope this helps!

Hi All,
I would like to know about the taxation by LTCG and STCG for NRIs in the following scenarios -

I do not have any other income other than LTCG and STCG from Equity shares ( paid STT )
I invested in ELSS funds for 1.5 L for tax exception 80c.
Paid 50000 - for Medical insurance premium – 80D
Following the old regime tax slab ( Age < 60 ).

I hope by 80C ( 1.5L ) + 80 D ( .5L ) + Standard Deduction ( .5 L ) + basic slab ( 2.5 L ) + LTCG ( tax free first 1L )

  1. only have LTCG of 6 L - No tax needed to be paid
  2. only have STCG of 5 L - No tax needed to be paid
  3. have LTCG of 3.5 L and STCG of 2.5 L together. - No tax needed to be paid

or will it be taxed 15%, 10 % for STCG and LTCG irrespective of the tax slab and other deductions?

Could you please advise me? @TeamQuicko @Shrutika_Shah

Thanks,
Krishobh

Hey @krishobh,

The tax rates are similar in the case of NRI as in the case of residents. However, chapter VI-A are not allowed in case of capital gains(both long-term and short-term). Moreover, the standard deduction is only available in case of salary income and the basic exemption limit is not available in case of special rate income for NRIs.
Hence, only ₹1 lakh exemption will be available on LTCG. LTCG in excess of ₹1L will be taxed at 10% and STCG at 15%.

Hope this helps!