Selling property in India on Green card

Assuming your residential status as Non-resident

1. No. Immovable property sold by non-resident on or after 23.07.2024 does not get indexation benefit

2. In US, gains will be taxed as per the local tax laws (i.e. IRS) and you would be eligible to take benefit of DTAA (i.e. taxes paid in India)

3. Ideally you should have filed the ITR for the income generated in India for the period 2012 to 2024. As of now you can file the ITR for AY 2024-25 (i.e. F.Y 2023-24) till 31.12.2024. You are not required to file the ITR between 2012 and 2024 before the sale of the property.

- Buyer would be liable to deduct TDS@12.5%+surcharge+Ed.cess@4%. Surcharge depends on the amount of the consideration

- For transfer of proceeds you have to submit Form 15CA,15CB and A2

- You can also apply for the lower TDS deduction certificate

Hi

1. the government has discontinued the indexation benefit on long-term capital gains. This means that investors can no longer adjust the purchase price of their investments for inflation when calculating capital gains for tax purposes.

2. You have to check this with US laws I am not expert in this domain thus not saying anything.

3. You need not file your income tax returns for earlier years, but you have to file current year income tax return in India to claim your TDS (of you have refund as per your income computation) 

Or 

As per US India DTAA you can transfer your income and Tax credit to US and disclose this in your US tax returns 

For this also you have to file your income tax return in India disclosing this way 

Thanks 

• Indexation Benefit for Sale of Property: As per the recent changes in the law, non-residents selling immovable property in India after July 23, 2024, will not be eligible for the indexation benefit. This applies to long-term capital gains where normally indexation would adjust the purchase price for inflation​​.

• Taxation of Gains in the US: When you move the proceeds from the sale to the US, the gains will be taxed in the US according to the IRS rules for capital gains taxation. However, you can claim relief under the India-US Double Tax Avoidance Agreement (DTAA). This allows you to offset taxes paid in India against your US tax liability on the same income​​.

• Filing Indian Taxes from 2012 to 2024: You are not required to file taxes retrospectively in India from 2012 to 2024 before selling the property. However, you should file your Income Tax Return (ITR) for the current year in which you sell the property (FY 2023-24, AY 2024-25). This return will reflect the capital gains from the sale, and it is essential to claim a refund if the tax deducted at source (TDS) is higher than your actual tax liability​​.

• Additional Considerations:

  • The buyer in India will need to deduct TDS at 12.5% plus surcharge and cess based on the sale amount.
  • For transferring the proceeds to the US, you'll need to file Form 15CA/15CB and use Form A2 through your bank​​.

For detailed, personalized advice, consider a phone consultancy.

Hope you find the information helpful. You are free to contact me for further discussion.If you could spare two minutes of your time to write a review, It would be really grateful and very happy to read it.

Thank you.

Shubham Goyal

The associated tax implications both in India and the US:

1. Will You Get Indexation Benefit for the Sale of Property in India?

Yes, as a non-resident Indian (NRI), you will be eligible for indexation benefits when calculating long-term capital gains (LTCG) on the sale of your property in India. Here's how it works:

• Since the house was purchased in May 2006 and you're selling it now (after holding it for more than 2 years), the gains will be classified as long-term capital gains (LTCG).
  
  
  
• For calculating LTCG, the indexed cost of acquisition is considered. The Cost Inflation Index (CII) is used to adjust the purchase price of the property, thereby reducing the capital gains liability.​

• The LTCG tax rate is 20% in India, and you can also claim deductions under Section 54 or 54EC to reduce tax if you reinvest in property or specified bonds.

2. How Will the Gains Be Taxed in the US When You Move the Proceeds?

In the US, you're subject to worldwide taxation as a US tax resident (Green Card holder). This means:

• You will need to report the capital gains from the sale of your property in India on your US tax return, regardless of whether you bring the proceeds to the US or not.

• Since you've paid LTCG tax in India, you can claim a Foreign Tax Credit (FTC) under the US-India Double Taxation Avoidance Agreement (DTAA) to avoid double taxation. This allows you to offset the tax paid in India against the US tax liability on the same capital gains.

• The gain will typically be taxed at the long-term capital gains rate in the US (which can be 15% or 20%, depending on your income level).

3. Do You Need to File India Taxes from 2012 to 2024 Before Selling the Property?

No, you do not need to file your past Indian tax returns from 2012 to 2024 to sell the house in India. However, here's what you should keep in mind:

• Since you've been living in the US and filing taxes there, and if the property in India has been rented, you should have ideally reported the rental income in India as well. However, if you've been declaring this rental income in the US and paying US taxes, this shouldn't necessarily block your property sale.
• When you sell the property, you will need to ensure that you file your tax return in India for the financial year in which the sale occurs to report the capital gains.

Important Points:

• TDS on Property Sale: As an NRI, the buyer of your property is required to deduct TDS at 20% (plus surcharge and cess) on the sale proceeds if it's classified as a long-term capital gain. You can apply for a lower TDS certificate from the Income Tax Department if your actual tax liability is lower.

• If you have not filed taxes in India since 2012, you can start fresh by filing your capital gains for the year of sale without needing to go back and file previous years' returns, unless there was a specific obligation during those years (such as significant rental income that should have been taxed in India).

Summary:

1. Yes, you will get the indexation benefit for calculating capital gains in India.
2. You will have to report the capital gains in the US, but can offset taxes paid in India via the Foreign Tax Credit mechanism.
3. You do not need to file taxes in India for the years 2012–2024 just to sell the property, but you should file for the year of the sale to report capital gains.

No you will not get benefit of indexation as law changed after 23.07.2024.

Gains in USA needs to be discussed with USA CPA.

Hope you find the information helpful, if yes do rate if 5 and provide your valuable feedback for my improvement.

Thank you.