I am faced with a situation where I have to suggest one of my clients the implication of the situation :
My client is a NRI. He had booked a flat in the year 2005 at kolkata by paying partly out of his savings as well as a loan from a Bank in the US. The purchase price was 50 lakhs.The bank gave the cheque directly to the promoter of the building and my client paid his portion (25 Lakhs) from his NRE A/c.
However, not satisfied with the progress and the qualityof the work, my client decided not to go ahead with the purchase. The promoter gave him the option to sell it to someone elseand has also brokered to get it sold to someone else for 90 Lakhs.
My client has agreed to the proposal. However the question is :
Is the difference of the sale price and the indexed cost of Acquisition a "Transfer" of Capital Asset.It may be noted that my client had not got the flat registered in his name till now. So is he the legal owner at all ? If so is it taxable as Capital Gains? If not, is it taxable under any other heads of income?
Secondly, my client wants to repay the loan taken from the bank in the US. the question is , can he repatriate the profit and repay the loan. Can the amount received from the Promoter be deposited in his NRE A/c. Is there ant legal prohibition under FEMA or any other Act against such transfer.
I hope friend out here would help me find a solution to this problem
11 May 2009
The referred transaction comes under section 2(47) of the Income tax Act,1961 and accordingly capital gains tax attracts. Holding period starts from the year 2005.
Regarding repatriation of funds,there are restrictions, you may refer master circular in www.feme.rbi.org.in. Also you may refer rule 37BB of income tax rules,1962 and forms 15CA and 15CB contained therein in this regard.
11 May 2009
This is a short term capital gain as the capital assets is not in possession of the the seller and it will be taxable @ the rate applicable to an individual.
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