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Query on Capital Gains & FEMA

Suman (CA FINAL) (214 Points)

28 October 2010

Can a resident assessee Buy property Outside India, claim exemption u/s 54 (by selling property in India), on account of joining a foreign co?

Will there be any impact/restriction in FEMA?

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9 Replies

SUDHIR & PRADEEP JI (CA FINAL+LLB + DISA) (2299 Points)
Replied 28 October 2010

yes he can

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Suman (CA FINAL) (214 Points)
Replied 28 October 2010

Thanks for the reply:-)

vl there be any impact/restriction in FEMA

CA Navin Jain (MANAGER (FINANCE & ACCOUNTS)) (11768 Points)
Replied 29 October 2010

Yes, he can purchased the property outside India.

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Suman (CA FINAL) (214 Points)
Replied 29 October 2010

Thanks for Ur reply Sir..

Will there be any impact of FEMA. As per Sec 3 of FEMA Act, Acquisition of properrty outside India is restricted. Is there any relaxation??? kindly Clarify

CA Sandeep Kumar (Audit Assistant) (804 Points)
Replied 29 October 2010

It is a capital account transaction as it alters asset/liability position of resident.

Please read section 6 of FEMA for more clarification.

There are some restrictions, but however, RBI permission is required to acquire property outside india.

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Ashish Sharma (Service) (1028 Points)
Replied 29 October 2010

Hi,

Acquisition and Transfer of Immovable Property outside India
(GSR 390 (E) dated 3rd May, 2000)

In terms of these Regulations, acquisition or transfer of any immovable property outside India by a person resident in India would require prior approval of Reserve Bank except in the following cases

(i) Property held outside India by a foreign citizen resident in India;

(ii) Property acquired by a person on or before 8.7.1947 and continued to be held with the permission of the Reserve Bank;

(iii) Property acquired by way of gift or inheritance from persons referred to in (ii) above;

(iv) Property purchased out of funds held in RFC account.

General permission has also been granted to a person resident in India for transfer of a property acquired by him in terms of sub- paragraph (iii) and (iv) above to his relative as specified in the Explanation to Regulation no. 5, who is also a person resident in India.

RBI may also be permit a company incorporated in India having offices overseas to acquire immovable property outside India for its business or for residential purposes of its staff subject to necessity terms/conditions.

Further I am attaching related Circulars

Attached File : 18 13257.pdf downloaded: 203 times

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Ashish Sharma (Service) (1028 Points)
Replied 29 October 2010

Hi,

other related circular as only one file can attached

Attached File : 10 33791.pdf downloaded: 231 times

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Suman (CA FINAL) (214 Points)
Replied 29 October 2010

Thanks a lot :-)

Ashish Sir, thanks for clarifying and for sharing info n circular:-)

CA. CS. Khushboo Dodhia Vora (Practicing Charatered Accountant) (125 Points)
Replied 29 October 2010

As mentioned by Ashish, its very much permitted for a Resident Indian to acquire an immovable property outside India complying with the terms and conditions of FEMA Regulations.

Further for your information,exemption from capital gain is available for acquisition of a house even if it is situated in another country. The similar decision was given by the Appellate Authority in the case of Mrs. Prema P. Shah v. Income-tax Officer reported in 282 ITR 211 (Mum.). However the Higher Courts may also give an unfavourable decision.

So such reinvestment outside India can be made keeping in mind that the subject matter is not free from doubt and litigation as it is still not a settled law.