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NRI selling house property in India? Get all answers related to taxation here.

CA Rounak Jain — Sat, 20 Jan 2024 13:25:54 +0000

As a tax consultant we frequently deal with NRI clients on the topic of house property selling, it is with this knowledge, we have compiled & tried to answer here the top 10 frequently asked question by an NRI while selling their house property in India. We hope you will get your answer here.

Q1) Is there any restriction on sale of property by an NRI in india?

Ans – An NRI can freely sell his property in India, however if the property is an agricultural land,plantation land or farm house then in such scenario an NRI can’t sell property.Further if this agricultural land, plantation land or farm house is inherited to an NRI then he can sell but buyer should not be an NRI.

Q2) Why is the rate of TDS deduction so high for NRIs in comparison to residents?

Ans- It is a precautionary measure taken by the income tax authority, because if an NRI is not filing a return in India then it’s difficult to trace that person.Further, the rate is also kept higher in case an NRI doesn’t File ITR in India the objective of revenue collection on LTCG on the property sold will not be compromised.

Q3) Is there any way by which an NRI can reduce OR lower the rate of TDS deduction?

Ans- Yes an NRI can reduce or lower the rate of TDS deduction by obtaining a Nil/lower deduction certificate by filing Form 13 with the jurisdictional assessing officer.

Q4) Who is responsible for deducting TDS in case of NRI selling property in India?

Ans- The buyer of the property is responsible for the TDS deduction and does all the compliances related to that. However, it’s the NRI seller’s responsibility to disclose all the facts related to residential status to the buyer.

Q5) Is there any threshold limit up to which TDS is not deducted if the property is sold by an NRI?

Ans – As such there is no such limit, irrespective of the amount, NRI selling property in India will be liable for TDS deduction.

Q6) How as an NRI we can get confirmation on whether deducted TDS is deposited in our name or not?

Ans- To get the confirmation whether TDS is properly deducted and deposited, the seller can always ask for Form 16A from the buyer or we can also check in Form 26AS as well by logging on to the Income tax portal.

Q7) How difficult it is to take back or get a refund from the income tax department for the TDS deducted and deposited on the sale of property by an NRI?

Ans- To get a refund of TDS deducted on the sale of property by an NRI, the NRI must file his income tax return along with all the details of capital gains arising on the sale of property. If there is long term capital gains on such transaction then taxes arising on such transaction will be first adjusted with the deducted TDS and residue will be given as a refund.

Q8) NRI selling property in India and reinvesting the same in other properties in India, even then the TDS will be deducted at a higher rate?

Ans- Yes TDS will be levied at a rate (higher than normal) applicable to NRIs, however, to reduce the same one should file FORM 13 with the jurisdictional officer along with the necessary information on reinvestment, based on this if the officer feels satisfied then he can reduce the rate of TDS by issuing a lower deduction certificate.

Q9) What is the timeline to reinvest in a new property to avoid long-term capital gains on the sale of property by an NRI in India?

Ans- To claim this exemption, the NRI has to purchase one house property, within one year before the date of transfer or 2 years after the date of transfer or construct one house property within 3 years after the date of transfer of the capital asset. However, if the property is not finalized before the due date of filing the return then in such case the amount can be deposited into the capital gains saving scheme account.

Q10) Can an NRI buy residential property outside India to save taxes on property sold in India?

Ans – No, to take advantage of section 54, one has to reinvest in properties situated in India only

If you are an NRI and need consulting on Selling of house property call us on the below number.

Rule of 72

CA Rounak Jain — Wed, 03 Jan 2024 07:49:46 +0000

A simple mathematical hack to find out few important numbers whenever you are investing.

Rule of 72 is a quick way to find out how much time it will take to double your amoney or to find out the rate of return required to double your money when you invest in any asset like stocks, Mutual funds, FD’s, ULIP’s etc.

So, If you know the rate of returns of the asset in which you are investing, divide that number by 72, you will get the number of years it would require to double your money from that investment, vice-versa, if you know the number of years, divide it by 72, you will get the rate of returns required to double your money.

Easy?
Let us do this quick math on the common investments which we all do it & understand the time it takes to double the money. Assume the amount of investment to be 1 Lac rupees.

A usual FD which generates 6% return will take how much time to double up your money? (72 / 6) – 12 years
A PPF account if gives 8% return will take how much time to double up your money? (72 / 8) – 9 years
A well-diversified Mutual funds if gives 12% return will take how much time to double up your money? (72 / 12) – 6 years
A savings account if gives 5% return will take how much time to double up your money? (72 / 5) – 14 years

Now the most dangerous

Cost Inflation if stays at 5% year-on-year will take how much time to reduce your money into half ? Assuming if you keep the money at home.

Yes, inflation also grows year on year just like investments. So, if you divide 72 by 5 (72/5) the answer will be 15 years, which means If you keep your 1 lac rupees in safe locker at home, after 15 years the value of your money will reduce to half.

If you keep that same money in FD/ savings account, your money will double in say 12-15 years but so will the inflation. You will feel rich in absolute terms ( as 1 lac will become 2 lacs) but will you will be able to afford the same things which you could afford 15 years back with that 1 lac, nothing more, due to inflation.

"Anything which generates returns at 5-6-7-percentage range is not a good return on your money, at least in the earning age when the objective to invest is to grow your capital more than the inflation rate."

Is Rule of 72 important to know?

Not really, it’s not that important to know this rule. However, it can help sometimes avoid making bad investment choices. How?

Many Investors are advised to invest in things which can double their investment in 3 years which is amazing but how much possible is this?

Let’s apply Rule of 72 here to understand what returns will be required to double the investments in 3 years: Divide 72/3 – The answer is 24%.

So, to double your money, your investment should generate 24% annual returns. Is that possible? I don’t know.

Rakesh Jhunjhunwala (the famous investor) once said: “If I get 18% return on my investment, I am a King & If I get 21% return, I am an Emperor.

Achieving 24% returns is not easy, one can be lucky by investing in stocks few times but doing it consistently it is extremely difficult. Doing this basic mental maths can help you question such investments which on face looks lucrative to invest.

Next time if you get any investment opportunity from an advisor try using rule of 72 to find its doubling rate . It will be fun!

To start investing in Mutual Funds, call us today on 9819078444. We are Wealthsane.com, AMFI Registered Mutual Funds Distributor & Chartered Accountants

*Mutual funds investment are subject to market risk, returns discussed here are purely for informational purpose and not any assurity

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Types of Mutual Funds

CA Rounak Jain — Sat, 23 Dec 2023 09:59:00 +0000

Who said Mutual funds are meant only for those who can take risk? Or for those who can only invest for the long term. This is not at all true!

There are funds where you can invest only for a month & expect to earn returns better than savings banks rate or funds where you invest for a couple of years and expect to earn better returns than Bank FD’s.

In short for any type of financial goal, be it short term or long term there are Mutual fund for you to invest and earn better returns on your money.

Here we are listing all categories of mutual funds investments for you to get an understanding about them so you can invest in them & earn better returns.

The key thing here would be to know your financial goal & the timeline you have in your hand before investing and accordingly choose the funds.

Note – Even if you don’t have a specific money goal, it’s still a good idea to make your money grow. That’s a valuable financial goal we should all keep in mind.

Here are the categories of mutual funds

1) Liquid funds:

Financial Goals/Who should invest:

1) Park your money here instead of putting in bank savings account for all your annual payment commitments like insurance premiums, school fees & other big commitments due within one year.

2) Anyone & everyone should invest here.

Investment Tenure:

Anything less than one year

Where do they invest?

Liquid funds usually invest in government securities and bonds with maturities less than 91 days. Liquid Funds are mostly very safe investment options.

Returns:

Expect Better than bank savings rate

2) Short term/medium term debt funds:

Financial Goal/who should invest:

Invest here for any type of short term goals less than three years, also for investors who are looking for fixed income options can add these debt funds apart from investing only in Bank Fd’s . These funds are also a good option for retirees who are focused on retirement planning and currently parking their large cash surpluses only in Bank FDs.

Where do they invest?

They invest in government securities and bonds with maturities period ranging from 3-4 years.

Returns:

Expect to earn better return than Bank FD’s

3) Conservative Hybrid funds:

Financial Goal/who should invest:

Investor who want to start investing in mutual funds but are extremely risk averse can opt for these funds to begin with as equity allocation in these funds are restricted at 25% which make them less volatile compare to pure Equity Funds.

Invest here for any type of short term goals less than 3 years as part of diversification from your Bank FD’s or for any financial goal which are couple of years ahead from now.

Where do they invest?

They invest in mixture of debt securities & equity markets however, the overall equity component is less than 25% in the portfolio.

Returns:

One can expect to generate slightly better return than inflation & Bank FD’s.

4) AggressiveHybrid/Balance Advantage Funds:

Financial Goal/Who should invest:

1)Investors who want to reduce exposure to Equity (Stock Market) but also want to get good returns can invest in these funds as these funds have allocation towards equity as well as debt in their portfolio. These funds are also less volatile compare to pure equity funds but more volatile compare to conservative hybrids mentioned above.

2) Invest here for any type of financial goals which are 4 to 5 years away from now.

3) Also one who is nearing retirement and wants to start investing lump sum corpus for better returns these funds can be a good choice. Retirees also can invest some portion of their money in these funds to generate inflation beating returns.

Tenure:

4-5 years

Where do they invest:

They invest 50-75% of investor money in equity (stock market) & rest in government securities, corporate bonds and other debt options however, the proportions can dynamically change in Balance Advantage Funds.

Returns:

If one invests for 4-5 years, he/she can expect to generate better return than inflation but less than pure equity funds.

4) Equity Funds

Financial Goals/who should invest

You can invest here for any financial goal that are more than six years away from here like saving for your kids’ education, planning for retirement, or making big ticket purchases but you should be willing to see negative returns in your investments for some periods as stock markets will keep moving up & down time and again during your tenure of investments.

Returns:

If one invests for more than 5-6 years, he/she can expect to generate superior returns compare to most other investment options available in market.

Where do they invest:

Investor’s money in these funds are invested in stock of individual companies (listed in India) & some also in foreign companies.

So these are broadly the types of mutual funds available for investments with different tenure & different investment goals, there are few more categories but many of them fall within the same investment objective hence not covered here.

If you still havent explored these categories it’s good time to review your financial goals & start investing in them.Have a good day.

*Mutual funds investment are subject to market risk, returns discussed here are purely for informational purpose and not any assurity

Schedule a 30 minutes appointment with us to start investing in Mutual funds

How to invest Rupees 25 lacs lumpsum in Mutual funds?

CA Rounak Jain — Sat, 23 Dec 2023 09:57:35 +0000

There are 2 ways you can invest money in Mutual Funds, one is through SIP (Systematic investment plan) route & the other is through making a lumpsum investment. If you are in the midst of thinking to make any lump sum investments in mutual funds this post will help you as a guiding tool.

First thing first, we think investing in mutual funds via the SIP route is the best method for most investors, as they offer many benefits, however, there are certain times when investor have free cash lying idle in bank savings account or parked in FD’s , it may be due to accumulation from years of savings or due to sale of an ancestral property or a gift from parents, so in cases like this planning a lumpsum investment into mutual funds can be a good idea.

Why?

Not only are they tax efficient but can give far better returns when compared with your traditional investment options like FDs, Gold, insurance & so forth.

Check this out

10 years investment data from 2013-2023 Investment of 25 lacs in to mutual vs FD vs Gold vs PPF

So, the question is how should you invest this lumpsum amount to work for you?

First & foremost, the most important thing is to take a hard look at your risk appetite, investing 25000 per month as SIP & investing 25 lacs are 2 different things. If your timeline to invest is less than 5 years you should not at all consider investing in equity-based mutual funds, another point is they are volatile, means you should be willing to see negative returns in your investment at least for a while due to market fluctuations. That’s the nature of mutual funds.

Second, you should not put this entire money in one shot, many people make this mistake as they get tempted by attractive outsize returns, However, Markets are impossible to predict in the short term; nobody knows whether they will go down or up. If you put this money in one go and the market goes down by 10-20% it will hurt you.

Sensex movement in last 1 year

The ideal way to invest your lump sum is to first put this into liquid mutual funds (consider them like savings accounts but they give better returns than them) & from there on gradually shift these into equity funds over a 1-year period.

How will this help?

As you do this gradually over 1-year period, you can take advantage of the ups and downs of the market by averaging your cost of buying, and they will go up and down, that is for sure. Any large downward market correction if happens in this 1 year period will be a bonus.

To do this gradual shift from liquid to equity funds, mutual fund houses provide us with a tool called STP (Systemic transfer plan), just like SIP, STP is a tool that helps you to move your money automatically from one fund to another hassle-free without your regular intervention.

Finally, how many funds we should use to invest this lumpsum money?

We think 4-5 funds are good enough diversification, mutual funds on their own are already diversified as they hold shares of at least 30-40 companies, so no point in doing over-diversification.

Once all your money is invested in equity funds just do a periodic review ( 1- year) of your portfolio, if there is a negative return in a particular fund, just review the portfolio it may just be a phase, the underline stocks in the funds might be going through a temporary blip their performance might revert back in time & once the stock performance revert, so will the fund performance.

We hope this was helpful, in case you have any doubts related to Lumpsum investments or anything related to taxation on mutual funds reach us on care@wealthsane.com or call us 9819078444

Happy investing.

Wealthsane |

NRI selling house property in India? Get all answers related to taxation here.

As a tax consultant we frequently deal with NRI clients on the topic of house property selling, it is with this knowledge, we have compiled & tried to answer here the top 10 frequently asked question by an NRI while selling their house property in India. We hope you will get your answer here.

Q1) Is there any restriction on sale of property by an NRI in india?

Q2) Why is the rate of TDS deduction so high for NRIs in comparison to residents?

Q3) Is there any way by which an NRI can reduce OR lower the rate of TDS deduction?

Q4) Who is responsible for deducting TDS in case of NRI selling property in India?

Q5) Is there any threshold limit up to which TDS is not deducted if the property is sold by an NRI?

Q6) How as an NRI we can get confirmation on whether deducted TDS is deposited in our name or not?

Q7) How difficult it is to take back or get a refund from the income tax department for the TDS deducted and deposited on the sale of property by an NRI?

Q8) NRI selling property in India and reinvesting the same in other properties in India, even then the TDS will be deducted at a higher rate?

Q9) What is the timeline to reinvest in a new property to avoid long-term capital gains on the sale of property by an NRI in India?

Q10) Can an NRI buy residential property outside India to save taxes on property sold in India?

If you are an NRI and need consulting on Selling of house property call us on the below number.

Rule of 72

A simple mathematical hack to find out few important numbers whenever you are investing.

Easy? Let us do this quick math on the common investments which we all do it & understand the time it takes to double the money. Assume the amount of investment to be 1 Lac rupees.

Now the most dangerous

"Anything which generates returns at 5-6-7-percentage range is not a good return on your money, at least in the earning age when the objective to invest is to grow your capital more than the inflation rate."

Is Rule of 72 important to know?

Next time if you get any investment opportunity from an advisor try using rule of 72 to find its doubling rate . It will be fun!

To start investing in Mutual Funds, call us today on 9819078444. We are Wealthsane.com, AMFI Registered Mutual Funds Distributor & Chartered Accountants

Introducing Wealthsane Mobile App.

Types of Mutual Funds

Who said Mutual funds are meant only for those who can take risk? Or for those who can only invest for the long term. This is not at all true!

Here are the categories of mutual funds

1) Liquid funds:

2) Short term/medium term debt funds:

3) Conservative Hybrid funds:

4) AggressiveHybrid/Balance Advantage Funds:

4) Equity Funds

Schedule a 30 minutes appointment with us to start investing in Mutual funds

How to invest Rupees 25 lacs lumpsum in Mutual funds?

Easy?
Let us do this quick math on the common investments which we all do it & understand the time it takes to double the money. Assume the amount of investment to be 1 Lac rupees.