Can a Foreign Citizen of Indian Descent claim Indexation Benefit while calculating Long Term Capital Gains from sale of a Residential Flat in India

Answer

A:

Yes, a foreign citizen of Indian descent (classified as a Non-Resident Indian or Person of Indian Origin under Indian tax laws) can claim indexation benefit while calculating long-term capital gains (LTCG) on the sale of a residential flat in India.

If the property is held for more than 24 months, the profit is treated as LTCG and is taxable at 20% (plus surcharge and cess). The cost of acquisition and improvement can be adjusted using the Cost Inflation Index (CII), which helps reduce the taxable capital gain.

For example, if the property was purchased years ago at a lower price, the indexed cost increases the purchase value in line with inflation, thereby lowering the taxable profit. This benefit is available to NRIs/PIOs just like it is to resident Indians.

However, buyers are required to deduct TDS at 20% (plus surcharge and cess) on the capital gains when purchasing property from an NRI. If the actual tax liability after indexation is lower, the seller can claim a refund by filing an income tax return in India.

 A foreign citizen of Indian descent is fully eligible to claim indexation benefit on LTCG from sale of residential property in India, provided the asset qualifies as a long-term capital asset.