Navigating the Income Tax Act, 2025: This guide covers essential tax rules for NRIs selling property in India, including TDS and treaty relief.
l I am an NRI based in Canada and plan to sell our family property. Do I have to pay capital gains tax in India on the proceeds?—A K Singh
The capital gains from sale of a property situated in India are taxable in India even if you are an NRI living in Canada. The tax amount depends on how long the property was held and how the gain is computed. In practice, a major issue for NRIs is that the buyer is usually required to deduct tax at source under the provisions of the Income-tax Act, 2025 on the sale payment, which may be higher than the final tax actually payable unless a lower deduction certificate is obtained.
There is also a practical cross-border aspect here, if the same gain is taxable in Canada, relief may generally be available under the India-Canada tax treaty by way of foreign tax credit, so the position is not one of double taxation in the absolute sense but of coordinated taxation across both jurisdictions.
l After retirement from my company, I will receive gratuity and leave encashment. Do I have to pay tax on these amounts?—Vinod Dixit
Gratuity and leave encashment received on retirement are fully exempt from tax under Section 10(10) and Section 10(10AA) of the Act, respectively, for Central or State government employees. For a private sector employee, the exemption for gratuity is limited to the least of Rs 20 lakh, actual gratuity received, or the amount calculated based on the specified formula as mentioned therein.For leave encashment, the exemption is restricted to the least of Rs 25 lakh, actual amount received, 10 months’ average salary, or the cash equivalent of unutilised leave (subject to a maximum of 30 days’ leave for each completed year of service).
l I incurred some loss in options trading in the last financial year. I have not booked any gains from investments in stocks. How can I offset the loss at the time of filing returns?—Akash Tyagi
Loss from options trading is generally treated as a non-speculative business loss, not as a capital loss, and that classification is important because it directly affects how the loss can be adjusted in the return. This means such loss cannot be set off against capital gains from shares or investments merely because both relate to the market instead, it can normally be adjusted against eligible business income and, if it remains unabsorbed, carried forward for future years subject to filing the return within the due date. Many taxpayers assume a trading loss can be netted against any investment income, but the law keeps business loss and capital gain in separate heads of income, and a delayed return may result in loss of carry-forward benefit.
The writer is managing partner, AKM Global, a tax and consulting firm. Send your queries to fepersonalfinance@expressindia.com
Disclaimer: The views expressed are the author’s own and do not reflect the official policy or position of Financial Express.
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