• Key Benefits of Scheme
• Eligible Investors
• Investment Opportunities
• Benefits offered to Non Residents of Indian Nationality/ Origin
• Benefits offered Overseas Corporate Bodies
• Checklist of Real Estate Buyers/ Seller
• Formalities in purchase of property
• General Prohibition
• Sale Proceeds
• Interest or share in a Co-operative Housing Society or Apartment Owners Association
• Repatriation of Rental income
• Refund of Purchase consideration on account of non-allotment of flats/ plots / cancellation of booking / deals in respect of immovable property purchased by NRIs / PIO in India
• Loans for acquisition of immovable property
• Loans against the security of immovable property
• Availing housing loan in rupees from the employer
• Capital gains on transfer of immovable properties
  

The Housing and Real Estate sector is emerging as a key area with immense potential for investment. Large scale urbanization and development have led to amazing growth in demand for residential properties and commercial complexes. The construction and supply of houses is managed by agencies in the public and private sectors. The demand for quality construction at affordable prices for the burgeoning middle class market – a whopping 300 million – is well recognized. The growing demand is leading the market and investment opportunities are fast emerging. Non-residents of Indian Nationality/ Origin as also Overseas Corporate Bodies that are predominantly owned by them have now been provided with excellent avenues for investment in the country’s Housing and Real Estate Sector. The Government has announced a new scheme with attractive features. The scheme removes some of the age old restrictions for the benefit of the NRI home buyers/ investors.

The scheme will cover investment by NRIs in housing and real estate ventures, housing finance institutions. Building material unit, etc., in terms of existing guidelines.

The Government has made it easier and attractive for intending NRI housing colonies in different cities so long as they make payments in foreign exchange and repatriate original investment. Repatriation of profits and dividends after taxation in respect of manufactures and building materials, participatory ventures in real estate, and investment in housing finance institutions will continue.

The NRIs with foreign passport will be permitted to acquire, in foreign exchange, immovable properties and only notify RBI. They will also be permitted to acquire, hold, transfer or dispose of properties by way of sale of inheritance, provided purchases are bona fid residential purpose and the sale consideration is met out of foreign exchange. They will also be permitted to let out the properties on rent.

Gifting of prosperities by NRIs to relatives is freely permitted. NRIs are permitted to acquire up to two houses provided the purchase is effected with foreign exchange.

In line with the general policy for encouraging NRI investment in various secotrs, the Government has been concerned about promoting substantial inflow of NRI investment in foreign exchange for the construction and purchase of residential houses and real estate in different cities. While scattered investments are now taking place, there has been no co-ordinated large scale effort for attracting such investments for housing and real estate. NRIs have been facing a number of problems in investment in the acquisition of houses, its sale and renting on account of present procedures of an number of Central and State Departments and regulations of RBI, CBDT, etc.

In the light of the liberalized provisions of the new Industrial Policy, it is expected that NRIs will collaborate with the Indian Counterparts in the area of house construction or real estate or manufacture of building materials subject to stipulations on investment and imports announced by the Government from time to time.

• Greatly enlarged scope for Investment
• Attractive Repatriation Benefits
• Simplified Rules and Procedures
• Exemption from Wealth Tax / Gift Tax
• Speedy clearance of Proposa

The following categories persons are allowed to invest in Housing and Real Estate in India:

• Non-residents currently holding an Indian Passport, or
• Foreign citizens who have held an Indian passport at any point of time, or
• Foreign citizens whose fathers/ paternal grand fathers were citizens of India by virtue of the Constitution of India or the Citizenship Act, 1955 ( Citizens of Pakistan, Bangladesh, Afghanistan, Bhutan, Sri Lanka and Nepal shall be deemed to be not of Indian origin), or
• Overseas Corporate Bodies (OCBs) predominantly owned by Non residents of Indian Nationality/ Origin

The following investment opportunities exist:

• Ownership of two residential houses in India with benefits of repatriation
• Development of serviced plots and construction of built-up residential premises;
• Real estate, covering construction of residential and commercial premised including business centres and offices
• Development of townships
• Development of city and Urban level infrastructure facilities including roads and bridges
• Building material production units, preferably related to prefab structures and other associated items
• Participatory / collaborative ventures, with Indian builders/ entrepreneurs in (b) to. In such ventures, the Indian collaborator should be a company, either public or private limited and not a proprietary partnership firm;
• Investment in Housing Finance Companies

Issue of Equity Shares/ Convertible Debentures:

• Companies, both public and private limited-engaged in activities such as financing of housing, development of property covering construction of residential and commercial premises, development of townships, city and regional level infrastructure facilities like roads and bridges and manufacture of building materials are permitted to issue equity shares/ convertible debentures to Non-residents of Indian Nationality / Origin up to 100% of the new issue.
  
  
• Non-residents of Indian Nationality / origin are free to repatriate the interest/ dividend after taxation. Without any lock-in-period.
  
  
• Repatriation of the original investment in equivalent foreign exchange is permitted after a lock-in-period of 3 years, with prior permission of the Reserve Bank of India (RBI).

Acquisition/ sale of immovable properties by individuals:

• Non-residents of Indian Nationality / Origin are permitted to acquire by way of purchase or inheritance and transfer or dispose of by way of sale or gift, immovable property without prior approval of the RBI.
  
  
• They can acquire in foreign exchange upto two houses with repatriation benefits. RBI's general permission has also been extended to acquisition of commercial and office complexes.
  
  
• Repatriation of the original investment in foreign exchange or resale of a maximum of two houses is permitted, with the prior permission of the RBI, while retaining in India only the profits.
  
  
• No permission is required for renting, transfer of gifting of properly as long as there is no repatriation of the proceeds.

The benefit under the scheme have also been extended to the OCBs. The scheme has a good deal of promise for them too, as the economy is on the upswing, in a liberalized environment. OCBs are now allowed to:

• Invest through participatory ventures in the development of serviced plots, construction of residential and commercial premises, development of townships, development of infrastructure facilities, manufacture of building materials and in Housing Finance Companies
• Repatriate the principal investment in foreign exchange and net profits upto 16% earned after the first three year of investment;
• Repatriate dividend / interest on equity shares/ debentures subject to the payment of applicable taxes, without any lock-in period; and
• Acquiring residential / commercial property only o non- repatriation basis, with prior approval of the RBI.

The benefit under the scheme have also been extended to the OCBs. The scheme has a good deal of promise for them too, as the economy is on the upswing, in a liberalized environment. OCBs are now allowed to:

• Land should have a clear title, check with the office of the Sub-Registrar.
• Income tax clearance certificate needed for properties worth over Rs. 5 lakh.
• Stamp duty to be paid by the buyer on registering the sale deed.
• Check if the land requires clearance under the Land Acquisition Act
• Insist on a clear mention of the carpet, covered and super-built-up area you pay for in the sale deed; this is important for resale
• Insist on a clear mention of the carpet, covered and super-built-up area you pay for in the sale deed; this is important for resale
• Insist on a completion certificate and a map with the sale deed.
• Establish how the intended seller acquired the property in the first place
• Before buying vacant land, ask for a copy of the plan approval by the Town & Country Planning Board or other related government authorities.
• Clarify hidden costs like maintenance, fire prevention, house tax with builders.
• The sale of residential property for commercial use is no liability for the seller if the commercial dealing are considered illegal by authorities.
• In power of attorney (POA) transactions, insist also on sale agreement and will of the property in your name.
• POA dealings even with wills may not be considered security or collateral by banks or financial institutions for loans or overdraft facilities.
• POA deals may not provide you with the authority to sub-delegate the property

Clear title of land: before you buy any land, make some discreet enquiries from the neighbors and requests for a search to examine the title with the office of the sub-registrar. This helps to establish whether the property has already been mortgaged or sold.

Special care is required when you buy agricultural land, since their terminology is very different and so are the local laws. One person may own the land and another may own the crop growing o it, and this can cause confusion regarding possession of the land.

Ask for a copy of the plan approval by the Town and Country Planning Board or any other similar authority before buying vacant land.

Built-up property: Mr. X bought 2500sq. ft of area for Rs. 15 lakh in a housing complex. The usable area was just 2000sq. ft. this a common occurrence: builders often neglect to mention the break-up of carpet are, covered area and super build-up area. To avoid tension during a resell, insist on break-up being mentioned in the sale deed if it is omitted in the agreement.

Another factor is the hidden cost. Mr. Y had a budget of Rs. 20 lakh for his house an luckily one was available from a builder or so the advertisement indicated. When the deal was struck, he was suddenly confronted with a list of additional charges like maintenance and fire protection that sent all his calculations and savings haywire. So make sure you inquire about such costs well in advance.

Preferably deal with reputed builders; you should also avoid illegal constructions or purchases. For instance, purchase of residential property at commercial rates to set up shop is risk to be avoided. The authorities could at any point deem it illegal and shut it and the seller can in now way be held responsible.

The Municipal Corporation of Delhi maintains that it is the buyer’s duty to ascertain that what you purchase is legal. This is easily done by insisting that the seller provides the certificate of completion and encloses a map with the sale deed.

Payment of stamp duty and registering the sale deed: At the time of registration of the sale deed the buyer has to pay the stamp duty. The stamp duty is fixed as a percentage of the sale of property. This value not only varies in different part of the country but is also fixed at exorbitant rates. You pay 13 per cent in Delhi, 14.5 per cent in Uttar Pradesh and 12.5 per cent in Haryana

Purchase of immovable property in India involves many aspects besides provisions of Foreign Exchange Regulation Act, 1973. Stepwise discussion of various formalities involved for purchase of immovable property is given below:

Valuation: It is an important aspect to arrive at a bargain while deciding to purchase an immovable property. Besides making own assessment from the market, assistance of Government approved valuers may also be sought. A comprehensive valuation report indicating value of each of major asset and also the basis and manner of valuation must be obtained from an approved valuer against payment of his fee. Reputed approved valuers have set up their offices in all the important cities in India. In case of plantation, valuation report may also be obtained from recognized private valuers.

Verification of the title of vendor: This is the most important aspect of a purchase transaction of an immovable property and may be competently handled by a reputed lawyer / solicitor etc. The verification is necessary from following two angles:

• Validity of Title: The vendor must have a clear, valid and marketable title over the immovable property which is subject matter of transaction. This would require a close scrutiny of document of title produced by the vendor. The document must be a registered document.
  

• Abstention of Non-encumbrance Certificate:
  

• As per section 17 of the Registration Act, 1908 the following documents require compulsory registration:
  (a) Instruments of gifts of immovable property;
  (b) Other non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards to or in any immovable property.
  (c) Other testamentary instruments which acknowledge the receipt or payment of any consideration on account of the creation, declaration, assignment, limitation or extinction of any such right, title or interest;
  (d) Leases of immovable property, from year to year, or for any term exceeding one year or reserving an yearly rent; and (e) Non-testamentary instruments transferring or assigning any decree or order of a Court or any award when such decree or order or award purports or operates to create, declare, assign, limit or extinguish, whether jin present or contingent, of the value of one hundred rupees and upwards, to or in immovable property.

• All persons, whether resident in India or outside India, who are citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan require prior permission of Reserve Bank for acquiring or transferring any immovable property in India.
  
  
• A person resident outside India, who has been permitted by Reserve Bank to establish a branch, or office, or place of business in India (excluding a Liaison Office), has general permission of Reserve Bank to acquire immovable property in India, which is necessary for, or incidental to, the activity. However, in such cases a declaration, in prescribed form (IPI), is required to be filed wit the Reserve Bank, within 90 days of the acquisition of immovable property.
  
  
• An Indian citizen resident outside India does not require any permission to acquire any immovable property in India other than agricultural/plantation property or a farm house.
  
  
• An Indian citizen resident outside India does not require any permission to transfer any immovable property, to a citizen of India who is resident in India.
  
  
• An Indian citizen resident outside India does not require any permission to transfer any immovable property other than agricultural or plantation property or farm house, to a person who: -
  (a) is a citizen of India resident outside India, or
  (b) is a person of Indian origin resident outside India
  
  
• A person of Indian origin resident outside India does not require any permission to acquire any immovable property other than agricultural land/farm house/plantation property in India by purchase, from out of funds:
  (a) received in India by way of inward remittance through banking channel from any place outside India, or
  (b) held in any non-resident account maintained in accordance with the provisions of the Act and the regulations made by the Reserve Bank under the Act.
  
  
• A person of Indian origin resident outside India does not require any permission to acquire any immovable property in India other than agricultural land/farm house/plantation property by way of gift from a person resident in India or from a person resident outside India who is a citizen of India or from a person of India origin resident outside India.
• A person of Indian origin resident outside India does not require any permission to acquire any immovable property in India by way of inheritance from a person resident outside India who had acquired such property in accordance with the provisions of the foreign exchange law in force at the time of acquisition by him or the provisions of these Regulations or from a person resident in India.
  
  
• A person of Indian origin resident outside India does not require any permission to transfer any immovable property in India other than agricultural land/farm house/plantation property, by way of sale to a person resident in India.
• A person of Indian origin resident outside India does not require any permission to transfer agricultural land/farm house/plantation property in India, by way of gift or sale to a person resident in India who is a citizen of India.
• A person of Indian origin resident outside India does not require any permission to transfer residential or commercial property in India by way of gift to a person resident in India or to person resident outside India who is a citizen of India or to a person of India origin resident outside India.
  
  
• Repatriation outside India, including credit to RFC, NRE or FCNR account, of sale proceeds of any immovable property situated in India, requires prior permission of the Reserve Bank except in circumstances stated in paragraph 13 below.
  
  
• In the event of sale of immovable property, other than agricultural land/farm house/plantation property in India by a person resident outside India, who is a citizen of India, or a person of Indian origin, the authorised dealer may allow repatriation of the sale proceeds outside India, provided All the following conditions are satisfied:-
  (b) the immovable property was acquired by the seller in accordance with the provisions of the Exchange Control Rules/Regulations/Law in force at the time of acquisition, or the provisions of the Regulations framed under the Foreign Exchange Management Act, 1999;
  (b) the sale takes place after three years from the date of acquisition of such immovable property or from the date of payment of final installment of consideration for its acquisition, whichever is later;
  (c) the amount to be repatriated does not exceed
  (i) the amount paid for acquisition of the immovable property in foreign exchange received through normal banking channels or out of funds held in foreign currency non-resident account or
  (ii) the foreign currency equivalent, as on the date of payment, of the amount paid where such payment was made from the funds held in non-resident external account for acquisition of the property; and
  (iii) in the case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties.
  
  
• All requests for acquisition of agricultural land/plantation/property/farm house by any person resident outside India or foreign nationals may be made to the Chief General Manager, Reserve Bank of India, Central Office, Exchange Control, Department, Foreign Investment Division (III), Mumbai – 400 001.
  
  
• The NRIs/PIOs can freely rent out their immovable property in India without seeking any permission from the Reserve Bank. The rental income being a current account transaction is freely reportable outside India.

As far as repatriation of sale proceeds is concerned, such repatriation in respect of properties acquired by the person while being a resident of India or acquired by inheritance from a person who is resident of India, can only be effected with the prior permission of the Reserve Bank of India.

In the event of sale of properties other than agricultural land / farm house / plantation property in India by a person resident outside India who is a citizen of India or a person of Indian origin, the authorised dealer may allow repatriation of sale proceeds outside India subject to the condition that the immovable property was acquired by the seller in accordance with the provisions of foreign exchange law in force at the time of acquisition or the provisions of FEMA and the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations 2000 and the amount to be repatriated does not exceed the amount paid for acquisition of the immovable property in foreign exchange received through normal banking channels or out of funds held in Foreign Currency Non- Resident Account or the foreign currency equivalent as on the date of payment, of the amount paid where such payment was made from the funds held is Non- Resident External Account for the acquisition of the property concerned. Repatriation can be made for a maximum of two residential properties.

The repatriation of sale proceeds has been restricted to US $ 1 Million per calendar year if properties are acquired from rupee sources by way of inheritance or legacy. This repatriation can be done out of the sale proceeds received from sale of property acquired from rupee sources subject to the condition that the property should have been cumulatively held for a minimum period of 10 years. Further the repatriation is restricted to the amount of foreign exchange remitted by way of inward remittances/NR/FCNR account. However, there is no lock-in period in respect of immovable property acquired by way of inheritance/legacy.

The only significant restriction that exists is with respect to PIOs who are citizens of Pakistan, Bangladesh or Sri Lanka, China, Afghanistan or Iran. These PIOs need to obtain prior approval of the Reserve Bank of India with documentary evidence in support of inheritance and tax clearance/no objection certificate from the Income-tax authorities. Yet another rule exists with respect to the number of residential properties that can be repatriated. In case of residential units, the restriction is two and for commercial properties, there is no limit. However, rental income is freely repatriable since it is a current account transaction.

Though the word "immovable property" has been widely used in FEMA, no where does it define the term. Further, even the definition of "immovable property" given in the Transfer of Property Act, 1982, the General Clauses Act, the Sale of Goods Act and the Indian Registration Act, taken together, do not clarify what "immovable property" is. They only suggest what is either included or not included in "immovable property". In fact, in the above Acts, shares in the co-operative society are not so included in the definition of the term” immovable property".

However, the Supreme Court of India has made its definition clear in the case of Hanuman Vitamin Foods Pvt. Ltd. v/s State of Maharashtra (2000) 6 see 345, confirming the Bombay High Court decision in Hanuman Vitamin Foods Pvt. Ltd. & Ors v/s. State of Maharashtra & Superintendent of Stamps, Bombay (Writ Petition Number 1820 of 1986, dated 17th February, 1989). The matter of contention in this case was whether the instrument of transfer of shares in a co-operative society was an instrument for transfer of an immovable property, for purposes of levy of stamp duty thereon. The Supreme Court held, by referring to another decision in Veena Hasmukh Jain v/s. State of Maharashtra (1999) 5 SCC 725, that the agreement to sell shares in a Co-operative Society is, in effect, the agreement to sell immovable property.

Accordingly, any interest or share in a Co-operative Housing Society or Apartment Owners Association (also known as Condominium abroad) is an immovable property for the purposes of these Regulations.

NRI/PIOs can freely rent out their immovable property, whether purchase through application of forex or otherwise, without seeking any permission from the RBI. The rental income being a current account transaction is repatriable outside India, only if proper tax is paid or provided for.

Where the house is purchased through housing finance and if the house is rented out, the entire rental income, even if it is more than the prescribed installment, should be adjusted towards repayment of the loan. If the rental income is less then the prescribed installment, the borrower should remit the amount of the extent of the shortfall from abroad or pay it out of his NRE, FCNR or NRO account in India.

Authorized Dealers are permitted to credit refund of application/earnest money/purchase consideration made by the housing building agencies/seller on account of non-allotment of flat/plot cancellation of bookings/deals for purchases of residential, commercial property, together with interest, if any (net of income tax payable thereon), to NRE/FCNR account, of Non-­Resident Indian/Persons of Indian Origin provided, the original payment was made out of NRE/FCNR account of the account holder or remittance from outside India through normal banking channels and the authorised dealer is satisfied about the genuineness of the transactions (refer to A.P. (DIR Series) Circular No.46 dated November 12, 2002).

Reserve Bank has granted general permission to certain financial institutions providing housing finance e.g. HDFC, LIC Housing Finance Ltd., etc., to grant housing loans to NRIs for acquisition of a house/flat for self occupation subject to certain conditions. The purpose of loan margin money and the quantum of loan will be at par with those applicable to housing loans to residents. Repayment of loan should be made within a period not exceeding 15 years out of inward remittances or out of funds held in the investor’s NRE / FCNR / NRO Accounts.
Apart from housing finance institutions, authorised dealers have also been granted permission to grant housing loans to NRIs for acquisition of a house/flat for self occupation subject to the same conditions as housing finance institutions.

Authorized dealers can also grant housing loan to NRIs where he is a principal borrower with his resident close relative as a co-applicant / guarantor or where the land is owned jointly by such NRI borrower with his resident close relative. Such housing loans availed in rupees can also be repaid by the close relatives of the borrower in India (Please refer to Regulation 8 of Notification No.FEMA 4/2000-RB dated May 3, 2000 and A.P. (DIR. Series) Circular No.95 dated April 20, 2003 and A.P. (DIR Series) Circular No.94 dated May 25, 2003).

An NRI can borrow against the security of immovable property from Authorised Dealer subject to following conditions:

• The loan should be used for meeting the personal requirements or for borrower’s own business purposes; and
• Loan should not be used for prohibited activities, namely;
  (a) Business of chit fund, or
  (b) Nidhi Company, or
  (c) Agriculture or plantation activities or in real estate business, or construction of farm houses, or
  (d) Trading in Transferable Development Rights (TDRs),
• The loan amount cannot be remitted outside India,
• Repayment of loan shall be made from out of remittances from abroad or by debit to NRE/FCNR/NRO account or out of the sale proceeds of shares or securities or immovable property against which such loan was granted. (Please refer to Schedules 1 and Schedules 2 to Notification No.FEMA 5/2000-RBI dated May 3, 2000)

A NRI can avail housing loan in rupees from his employer subject to the terms and conditions mentioned in Regulation 8A of Notification No.FEMA 4/2000-RB dated May 3, 2000 and A.P. (DIR Series) Circular No.27 dated October 10, 2003.
Investment in Housing and Real Estate Development (10C. 13 of Exchange Control Manual)

RBI has given permission to NRIs/OCBs to invest on repatriable basis upto 100% in the new issues of equity shares/convertible debentures by an existing or new company engaged or proposing to engage in the following activities:

• Development of service plots and construction of built- up residential premises;
• Real estate covering construction of residential and commercial premises including business centers and offices;
• Development of townships; City and regional level urban infrastructure facilities, including roads and bridges;
• Manufacturing of building materials; and Financing of housing development.

Repatriation of original investment will be permitted after a lock in period of three years from the date of issue of the equity shares/convertible debentures. Annual dividend on equity shares/interest on debentures can, however, be freely repatriated, subject to payment of applicable taxes. In case of OCBs, net profit (upto 16%) arising from the sale of such investment after the lock-in period of three years can also be repatriated.

The RBI permission is not required for acquiring/ holding or transfer/disposal of immovable properties by Indian citizens’ resident outside India. Indian citizens holding immovable property in India but who acquire foreign citizenship at a later date are required to take permission from the RBI for continuing to hold the immovable properties.

The facilities are granted to OCBs so long as the ownership/beneficial interest held in them by persons of Indian nationality/origin resident outside India continues to be at least 60 per cent. To ensure this, the OCBs have to furnish a certificate from an overseas auditor/chartered accountant/certified public accountant in form OAC/OAC-1, at the time of applying for the facility for the first time and thereafter as and when required by Reserve Bank/authorised dealers. The overseas auditor/chartered account/certified public accountant has to certify that the ownership interest in the OCBs is held by NRIs. The documentation accompanying Form OAC/OAC-1 have to clarify that the interest held by persons of Indian nationality/origin in the OCB is actually held by such persons and is not held by them in the capacity as nominees.
Provisions regarding PAN

As per Rule 114B(a) of the Indian Income Tax Rules 1962, a person has to quote his PAN in all documents for the sale or purchase of any immovable property valued at Rs 5,00,000 or more. But as per Rule 114C of the rules, an NRI need not apply for and obtain PAN for any transaction regarding the sale or purchase of immovable property.

The non-residents who are filing the Return of Income may be allotted PAN by the Assessing Officer under section 139A (2) of the Income-tax Act. However, if PAN is not allotted he should apply to obtain P.A.N.

The non-residents are exempt from obtaining the PAN under section 139 A (8) (d) of the Income-tax Act. It is advisable to obtain PAN by non-residents who are filing the Return of Income. For others, they may apply for it for the sake of convenience.

>Also, procedurally the Income-tax department is not accepting the Returns of Income from any person who has not obtained or applied for PAN. Hence, one may submit PAN application along with his Return of Income.

The profit on sale of capital asset is treated as capital gains. The capital assets (which are not held as stock-in-trade) are Shares, Debentures, Government securities, Bonds, Units of UTI and Mutual Funds, Immovable property etc.

The capital gains are segregated into long-term capital gains and short- term capital gains in following manner:

Capital Asset Short-term Long-term

• Equity shares, and listed securities, Units of Unit Trust of India or Mutual Funds. If held for a period not exceeding 12 months from the date of acquisition. Capital asset which is not a short-term capital assets is long- term capital asset
• All other investments and immovable property. If held for a period not exceeding 36 months from the date of acquisition. Capital asset which is not short-term capital assets is long-term capital asset

Cost of acquisition:
Cost of acquisition in case of long term capital assets other than Specified Assets means Indexed Cost of Acquisition.


Indexed Cost of Acquisition:

For long term capital assets other than Debentures and Bonds (except capital index bonds issued by the Government), the Cost of acquisition means Indexed Cost of Acquisition The system helps you to claim higher cost than actual cost of acquisition. The term "indexed cost of acquisition" is the amount which bears, to the cost of acquisition, the same proportion as cost inflation index for the year in which the asset is transferred bears to the cost inflation index for the first year in which the asset was held by the assesses or for the year beginning on April 1, 1981, whichever is later.

(a) Long Term Capital Gains - Immovable Property held for more than 3 years

This section deals with
(i) Long Term Capital Gain i.e., assets held for more than 36 months and in case of shares and securities more than 12 months.
(ii) It applies to all Immoveable properties and other assets.
(iii) Capital Gain will arise at the time of transfer i.e., sale, exchange, relinquishment etc.
(iv) Long Term Capital Gain shall be computed by considering Indexed cost of acquisition and Indexed cost of Improvement.

(b) Long Term Capital Gains - Immovable Property held for more than 3 years

This section deals with
(i) Short Term Capital Gain i.e., gain arises from assets held for not more than 3 years.
(ii) It applies to all short term assets except shares and debentures of Indian Company. For shares and debentures holding period is not more than 12 months.
(iii) Capital Gain will arise at the time of transfer i.e., sale, exchange, relinquishment etc.
(iv) In this case, benefit of Indexation is not available.

Exemptions available on re-investment

NRIs are entitled to claim exemption from capital gains tax if they reinvests (within 6 months of sale) long-term capital gains into following assets:

itled to claim exemption from capital gains tax if they reinvests (within 6 months of sale) long-term capital gains into following assets: