NRIs information to property acquired as reward

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The set of tax and regulatory implications for properties acquired by NRIs as reward are vastly totally different from these acquired as inheritances. On this article, we see what these implications are.
Can an NRI obtain property in India as a present?
Sure, NRIs and PIOs can obtain property as items from an individual resident in India, from one other NRI or from a PIO. Nonetheless, the property could be solely a business property or a residential property. Agricultural land, plantation property and farm home in India can’t be acquired by means of reward.
A international nationwide of non-Indian origin can’t purchase property in India by means of reward.
What are the tax implications on the time of receiving the reward?
Presents acquired from ‘kin’ will not be liable to tax. Kin embrace: * Partner of the person; * Brother or sister of the person; * Brother or sister of the partner of the person; * Brother or sister of both of the mother and father of the person; * Any lineal ascendant or descendant of the person; * Any lineal ascendant or descendant of the partner of the person; and * Partner of the individual referred to in clauses (ii) to (vi)
Furthermore, if the reward was acquired on the event of marriage or from a registered belief, it could be exempt from this tax.
Any items over Rs 50,000 acquired from people who find themselves not kin are taxed as earnings within the arms of the individual receiving the reward. So that you would wish so as to add the truthful market worth of this property to your whole earnings and pay tax thereof.
The property can also be topic to wealth tax. In keeping with the Wealth Tax Act, tax is payable if the online worth (market worth minus any loans taken to finance the property) of the property of a person exceeds Rs 30 lakh.
Now, there are particular exceptions to the definition of ‘property’.
i. Just one home
For those who personal just one residential home, you wouldn’t have to pay wealth tax. So after receiving the property as reward, if that is the one property that you simply personal, you wouldn’t have to pay wealth tax on it.
The query arises as as to whether this consists of international properties. As an illustration, if an NRI owns a property within the US and will get one as a present in India, will he be topic to wealth tax on the property in India?
Parizad Sirwalla, Government Director – Tax at KPMG explains, “For an Indian citizen who qualifies as a ‘Resident however Not Extraordinary Resident (NOR)’ or ‘Non-Resident (NR)’ of India (as per the Revenue Tax Act 1961) in addition to for a international nationwide, wealth tax is relevant solely on the desired property situated in India. Specified property situated outdoors India are topic to wealth tax solely within the case of Indian residents who qualify as ‘Extraordinary Resident (OR)’ of India as per the IT Act.
Within the instantaneous case, if the NRI qualifies as ‘NOR’ or ‘NR’ of India, the US home property won’t be thought-about as a specified asset for wealth tax. Additional, the home property in India could also be thought-about as exempt beneath Part 5 of the Wealth Tax Act supplied that is the one home he owns in India.
The US home property will likely be thought-about as specified asset for wealth tax, provided that this NRI (assuming Indian citizen) qualifies as ‘Extraordinary Resident’ of India for the related monetary yr. In such case, as one residential home property is exempt for wealth-tax, both of the property (US or India) could be thought-about as exempt (as per Part 5 of the WT Act) and the steadiness will likely be taxable. ”
ii. Home given on hire for greater than 300 days
If in case you have given the property on hire for greater than 300 days throughout a monetary yr, you wouldn’t have to pay wealth tax.
If the online worth of all of your property, together with the reward property exceeds Rs 30 lakh, wealth tax will likely be charged at 1% of the quantity exceeding Rs 30 lakh.
Will the provisions of clubbing of earnings be attracted for earnings tax in addition to wealth tax functions?
Whereas the reward in itself just isn’t taxed within the arms of the receiver if the receiver is a relative, Sirwalla is fast to warning, “Clubbing provisions just like earnings tax apply and have to be evaluated in case of reward to partner and son’s spouse. In such a case, property would proceed to belong to the donor for the aim of wealth tax applicability.”
What this implies is that in case of items made to the partner or son’s spouse, any earnings earned by the gifted property is clubbed collectively within the arms of the individual giving the reward. So if a resident Indian has gifted a property to his son’s spouse who’s an NRI, then the hire earned from such property will likely be added to the full earnings of the individual giving the reward.
Such property can even be added to the online wealth of the individual giving the reward for wealth tax functions.
Can an NRI hire out property acquired as a present? What are the implications?
Sure, an NRI can hire such property. The implications are the identical as these relevant for renting out bought property.
Can an NRI promote and repatriate proceeds of property acquired as a present?
Sure, an NRI can promote property acquired as a present. The sale proceeds of such property must be credited to NRO account solely. From the steadiness within the NRO account, NRI/PIO could remit as much as USD 1 million per monetary yr, topic to the satisfaction of licensed seller and cost of relevant taxes.
What are the tax implications on sale of property acquired as reward?
The tax implications of sale of property acquired as reward are the identical as these relevant in case of bought property.
Be aware: The acquisition worth for calculation of capital beneficial properties would be the buy worth paid by the one that gifted the property. The holding interval for figuring out if the beneficial properties are long run or brief time period will likely be computed from the date of buy by the one that gifted the property.
Can an NRI reward property?
Sure. An NRI or PIO could reward residential and business property to individual resident in India or an NRI or a PIO. Nonetheless, if the property is an agricultural land, plantation property or farm home, it may be gifted solely to an individual resident in India who’s a citizen of India.
A international nationwide of non-Indian origin requires the prior approval of the Reserve Financial institution for gifting any sort of property.
Double Taxation
You’ll additionally have to look into provisions of the nations you reside in, with a view to decide tax implications of reward properties. Within the US for example, people are topic to property tax. An article on it will observe quickly.



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