Taxation of Capital Gains

This query is : Resolved

rajiv (Querist)
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20 April 2011 RX was an Indian resident till year 2000.He had purchased a commercial building for Rs. 50 Lacs in 1999.

For the last 11 years he has been working and living in New Zealand.In 2011 he has sold his commercial building in India for Rs. 120 lacs.After indexation his capital gains comes to 30 lacs.kindly help in following query:

1. Is exemption from Tax on Capital gains is available to RX as per the provision of India-New Zealand double taxation avoidance treaty 1986.

2. If exemption from Income Tax on capital gains is not available and RX pays Income Tax on Capital gains in India and after paying tax RX remits balance proceeds to New Zealand, will there be any tax liability arising in New Zealand again on the same income ?
3. To Save Income Tax on capital gains on sale of commercial property what are the investment options available in India ?

CA. Anuj Gupta

CA. Anuj Gupta (Expert)
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20 April 2011 1. The capital gain shall be taxable in India and no exemption is provided under India-New Zealand Treaty.

2. Yes the tax liability can arise in New Zealand and for that local New Zealand tax consultant should be contacted.

3.To buy a new house or invest in capital gain bonds.

4.Also as per FEMA you can take upto 10 million dollars as proceeds of sale of Indian property after payment of appropriate taxes.

Anuj
0-9810106211

rajiv

rajiv (Querist)
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21 April 2011 Thanks for reply.

however wrt to point no. 2
1. How can an Income accruing and received in India but remitted to New Zealand be taxed in New Zealand.

It amount to double taxation of the same income and is violative of Double Taxation avoidance agreement.
Pl clarify

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CA. Anuj Gupta

CA. Anuj Gupta (Expert)
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21 April 2011 In similar way as income accruing and arising in new Zealand can be taxable in India for a person who is resident in India.

Double Taxation Avoidance Agreement provides that a if the income is taxed twice then the credit of taxes deducted in source country is provided in the country of residence.

Anuj
-9810106211