Foreigners must pay capital gains tax

bank for three years to avoid paying capital gains tax.

Since I did not have any income from India, I am not a tax assessee here. In these circumstances, do I need to file a tax return? Rafi Ahmed

Via email You need to file your income returns for financial year 2012-13 before July 31, 2013, showing the particulars of long-term capital gain. The provisions of Section 54F (for long term capital gains) will be applicable to you.

The long-term capital gain arising from the transfer of any capital asset, not being a residential house, will be exempt if the assessee has pur- chased or constructed a residential house subject to the fulfillment of conditions given hereunder.

Within a period of one year before or two years after the date of transfer or sale of original asset, the assessee purchases a residential house or constructs a residential house within three years after the date of transfer or sale of original asset;

If the net consideration is not used for the purchase of a new asset before the due date of filing tax returns, it should be deposited in a bank account. The amount so deposited should be used for the purchase or construction of a new residential house within a stipulated time.

The cost of purchase or construction of new asset should not less than the net consideration that you might have received for the sale of your old asset.

Apart from these, you should not be owning more than one residential house, other than new asset, on the date of transfer of original asset.

You will not get any tax exemption, if you purchase within one year or construct within three years after that date, any residential house, other than new asset.

If all these conditions are satisfied, the capital gain arising on sale or transfer of original asset will be wholly exempt.

If only a part of the net consideration is invested in the new asset, the proportionate capital gain will be exempt. For instance, if you have used only 50 per cent of net consideration for the purchase of the new asset, only 50 per cent of capital gains would be considered for exemption.

After availing the exemption, you have to own the new asset at least three years and should not purchase any residential house other than new asset for a period of two years.

You did not fullfil either of these two conditions, the capital gain, which was originally exempted, will be treated as long-term capital gain when the newly acquired asset was disposed off.

(Kamal Rathi is a Hyderabad-based CA and can be contacted at kamalrathi.ca@gmail.com)