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V Nagarajan: Any gain earned in property sale is subject to tax in India
June 24, 2018
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Exclusive to The Gulf Today


I have claimed long-term capital gains in 2015 while investing in a new unit. However, due to market slowdown, the developer has still not completed the project. Will the authorities reverse the long-term capital gains exemption availed? Please clarify. Anirudh, Dubai.
No. The long-term capital gain claim will not be reversed just because the developer has defaulted the completion of the project on time. There are various rulings in favour of the taxpayers where it has been held conclusively that to claim exemption under section 54, completion of construction within three years is not mandatory.

The construction must start within three years.
 
 I have recently acquired foreign citizenship and planning to migrate to US. I am planning to sell my property in India and repatriate the sale proceeds. What are the tax implications? Kindly clarify. Abhishek, Sharjah.
As regards immovable property, any gains earned on sale is subject to tax in India. If the property is held for more than two years, the resultant gain shall be termed as long-term capital gain and subject to tax at 20 per cent, plus applicable surcharge and cess.
 
You are also eligible for cost indexation benefit that is, the cost of acquisition of the property and any improvement carried out subsequently for the inflation factor. Similarly, any expenses incurred towards sale by way of brokerage is also deductible.
 
You can repatriate sale proceeds of residential property upto two residential units through authorised foreign exchange dealers and compliance with the FEMA guidelines.
 
Is plot loan available for NRIs while investing in land in India? How can such a loan be repaid while employed abroad? Anantkumar, Abu Dhabi.
NRIs/PIOs can avail of loans for plots from an authorised dealer or housing finance institution subject to prescribed terms and conditions. Such a loan can be repaid (a) by way of inward remittance through normal banking channel or (b) by debit to his NRE/FCNR (B) / NRO account or (c) by the borrower’s close relatives, as defined in Section 6 of the Companies Act, 1956, through their account in India by crediting the borrower’s loan account.

Notes
 
The Indian retail sector has attracted cumulative investment worth Rs55 billion between 2015 and the first quarter of 2018. Close to Rs10 billion have been invested in the sector in the first quarter of 2018 making it one of the best quarters for the sector in recent times, according to JLL survey.
 
The steady increase in interest from PE investment companies, has propelled developers of retail malls to re-evaluate their portfolio vis-à-vis three determining factors, product, catchment and customer experience, which are core to creating a successful retail space. The findings of the report indicate that PE investors have shown confidence in the future trends of Indian retail real estate and have started to make large value as well long-term commitments towards the sector.
 
In a boost to affordable housing segment, the government has announced an increase in the carpet area of houses eligible for interest subsidy under the Credit Linked Subsidy Scheme for the middle income group beneficiaries. In the MIG 1 category of CLSS, the carpet area has been increased from the existing 120 sqm to upto 160 sqm. The carpet area in respect of MIG 2 category has also been raised upto 200 sqm from the existing 150 sqm.
 
Exchange Plan
 
The changes will be effective from January 1, 2017, which is the date when the CLSS for MIG had become effective.  Bengaluru based Puravankara group has announced a home exchange plan which would offer multiple benefits to home sellers who are looking to upgrade their homes. This new initiative has been conceived to address and simplify the needs of home sellers that intend to upgrade their homes. There is extensive research that suggests a keen interest among property owners of the working populace to upgrade their real estate assets. However, the complex and vague procedures of valuation and resale discourage the move. All they need is additional help to streamline the re-sale process to given the greater predictability of being able to sell their old home, said the company sources.

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The author is a business analyst
covering Indian property markets

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