NRI’s File Returns before 31st July
Why it’s Imperative for NRI’s who are buying, selling and leasing properties in India to file regular income tax returns.
If you are an NRI and you are selling a property, it is mandatory for the Buyer to deduct 30% TDS, which means if you sell the property for example for 1 CR an amount of Rs.30 Lacs will be deducted by the Home Buyer and in turn, you will only get Rs.70 Lacs. You will get a Rs.30 Lacs Income Tax Deduction Certificate, which you could then claim a refund in your Income Tax Returns with calculations of your Capital Gains Tax based on Indexation and Re-Investment etc.
Typically, when you will sell a property in Mumbai after you have held for more than 3 years, it qualifies under Long Term Capital Gains.
Your Direct Tax Liability is 20% Capital Gains under Long Term Capital after indexation. But as per the Income Tax laws, the 30% TDS is deducted on the Total consideration amount.
The problem begins here, for example, you have bought the property for 1 Cr and you sold it for 1.50 Cr. Typically, speaking your Capital Gains should be Rs.10 Lacs or even less after indexation after the calculation of the Capital Gains. But the Income Tax department, clubs your base Capital Value Invested and your Capital Gain and after that it wants the buyers to deduct 30% which means 45 Lacs, which means your entire Profit or Capital Gain is gone to the government.
For this, you will apply for a lower Tax deduction certificate, which is available through the NRI Cell of Income Tax. To obtain this certificate, you have to first regularize your returns so that the Income Tax office/r knows that there are no outstanding tax dues on your name etc.
So, it is imperative to file your Tax Returns. Now with everything getting totally connected on Computers, you may have funds lying in your NRE or NRO account and you may have earned some interest on the same. The Bank by default will deduct the TDS and it will typically go unnoticed by you. But the amount is credited under your Pan Card in your account and only once you file your income tax returns, you will find that you may have a credit in your account.
The due date for filing returns by NRIs is 31 July of each year.
When to file
The returns have to be filed if the income exceeds the taxable limit, or to claim a refund if the tax deducted at source is more than the tax payable, or to claim the amount set off against capital losses. But in general, one must file returns regularly.