r2i forum

hi,

My brother is based in USA and is an USC. He recently sold a flat in Bangalore and has some capital gains out of it. He has asked me to suggest how to deal with the capital gain :confused:

Since he is not filing any taxes in India, how does he file capital gain for this one of flat sale. I believe it is long term capital gain.

I have suggested the following on how to tackle capital gains:
-Reinvest in flat, as he sold flat
-Invest in Govt bonds, specific for capital gains savings
-Use capital gain amount to construct home on existing land
-pay capital gain tax @ 20 %

Am I missing any option above ?

If he picks any of the above option, how does he convey it to IT and
how does he explain which one he opted for.

Pardon my ignorance on the matters, as I have recently R2I'ed myself. :e

thx

Hi Amind,

Your brother can invest in any of the options provided under section 54 of the Income tax Act, which includes the options pointed out by you in your post. As far as the India taxes is concerned he will be able to claim the exemption from Long term capital gains taxes after investment in these options. Please note if the investment is not made before the date of filing India tax returns i.e. July 31st, then the amount has to be in Capital Gains Account Scheme, 1988 as a deposit in only those bank listed in the scheme.

Since your brother is a USC he has the obligation to report the India capital gains to the IRS and pay appropriate taxes on his US tax returns on this income. If he has paid any tax on the same gains here in India he may be eligible for a tax credit.

We ca assist you with both US and India tax filings from Pune. You can send us complete details on [email][email protected][/email] or visit us at www.kkassociate.com

Regards,
KKA
US and India tax filers.
www.kkassociate.com

amind;392992hi,

My brother is based in USA and is an USC. He recently sold a flat in Bangalore and has some capital gains out of it. He has asked me to suggest how to deal with the capital gain :confused:

Since he is not filing any taxes in India, how does he file capital gain for this one of flat sale. I believe it is long term capital gain.

I have suggested the following on how to tackle capital gains:
-Reinvest in flat, as he sold flat
-Invest in Govt bonds, specific for capital gains savings
-Use capital gain amount to construct home on existing land
-pay capital gain tax @ 20 %

Am I missing any option above ?

If he picks any of the above option, how does he convey it to IT and
how does he explain which one he opted for.

Pardon my ignorance on the matters, as I have recently R2I'ed myself. :e

thx

Capital gains tax in India is 10% without indexation, or 20% with indexation (generally 20% with indexation is better for real estate).

Since your brother is a US citizen, he has to pay US taxes as well. He can claim a credit for Indian taxes. Investing in capital gain bonds is a bad idea. He will not be able to claim a credit for Indian taxes, and will end up paying full US taxes.

Reinvesting in flat may work, since it will avoid Indian tax AND defer (not avoid) US tax if he acts carefully. Section 1031 exchanges will allow deferring US capital gains if the new flat is purchased within a prescribed period and is similar to the existing flat. flat --> home on land will likely not help to defer US capital gains, since it would not be considered like kind.