FILING OF INCOME TAX RETURN BY NRI

[Dinesh Kumar]

My friend is NRI for last 16 years. He never had any income in India. Therefore he has not filed any tax return. In 2004 he booked one flat for40 Lakhs. Construction-linked payments were made from his NRE/NRO a/cs average8 Lakhs for 5 years. Before taking the possession, he sold this booking to a resident buyer for 42 Lakhs in 2009.

How this gain of2 Lakhs will be treated ?

Long-term Capital Gain OR Short-term Capital Gain OR Income from Other Sources !!

No TDS has been deducted by the buyer. Nor he filed any tax return assuming that indexation factor and exchange loss will be adjusted in the cost price which will result in loss in the transaction.

If taxable, can he file return now. What penalties he can face or buyer can face.

Kindly advise.

Thanks

Dinesh

[CAGOPALJI AGRAWAL]

On the basis of facts given, prima-facie, it would be LTCG and no tax liability seems to arise.

AI Summary

Long-term capital gain treatment for NRI resale of a booked property; no immediate tax liability presumed despite missing TDS. The issue is whether resale of a booked flat by an NRI, with construction-linked payments from NRE/NRO accounts and sale before possession without TDS deduction, results in taxable gain. The advisor concludes prima-facie that the transaction attracts Long Term Capital Gain treatment and that no tax liability appears to arise, while noting the absence of TDS and non-filing by the seller.