Can NRIs claim a refund on LTCG tax?

I am a non-resident Indian (NRI) living in Dubai. I have a Rs2 lakh monthly systematic investment plan (SIP) in equity mutual funds. I have also invested in some debt funds and I get a refund every year for tax deducted (TDS) at source on this. 

I would like to churn my portfolio every year before 31 March and reinvest the same by the financial year-end. Will the long-term capital gains (LTCG) tax reflect in the 26AS certificate? Can I claim a refund since I do not have any income from India? 

—Name withheld on request 

 

TDS is deducted on long-term capital gains and short-term capital gains earned by NRIs on both debt and equity mutual funds. TDS is deducted on your PAN details. Once the deductor deposits this TDS with the government and files their TDS return, the TDS deducted then appears in your Form 26AS. At the end of the financial year, you need to estimate your total taxable income and the tax liability on such income. In case you do not have any tax payable, you are allowed to claim a refund of the TDS deducted. 

 

My father-in-law is looking to sell his property and repatriate the proceeds to Canada.  What is the effective way to do this and limit our tax liability?

—Name withheld on request 

 

The rules for taxation of LTCG from the sale of a house property situated in India are the same for NRIs and resident Indians. Since the property is situated in India, the gains will be taxable in India. 

Gains from the sale of a property held for a period exceeding two years are taxed as LTCG. These are taxable at 20% (plus 4% cess) after indexation of the cost of acquisition of the property. Any costs of improvement are also allowed to be indexed and deducted.

Where property has been held for two years or less, the gains from its sale are considered as STCG and taxed according to slab rates. An NRI is allowed to claim exemption on LTCG by reinvesting them to purchase another property either one year before or two years after or construct a property within a period of three years. However, this property must be situated in India. If you do not wish to purchase a property, these capital gains may also be invested in capital gains bonds, which have a lock-in period of five years and earn an interest of around 5% which is fully taxable. 

Archit Gupta is founder and chief executive officer, Clear.in.

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