Mohali Home Sold From Abroad Gets No Indexation Choice विदेश से बेचे गए मोहाली के घर पर इंडेक्सेशन का विकल्प नहीं ਵਿਦੇਸ਼ ਤੋਂ ਵੇਚੇ ਮੋਹਾਲੀ ਦੇ ਘਰ ਉੱਤੇ ਇੰਡੈਕਸੇਸ਼ਨ ਦਾ ਵਿਕਲਪ ਨਹੀਂ

A family in Brampton bought a Mohali flat years ago. Aerocity was still filling up then, and so were the sectors along the airport road. Now they want to sell. Since the start of October the buyer of a home from a seller who lives abroad reports the tax deducted with a PAN on Form 141, and that change has sent many owners abroad back to a question the paperwork does not answer: how much tax does India actually charge on the gain?

The answer depends on where the seller lives in the year of the sale. A resident seller of a home bought before the July cut-off of the year the new flat rate began can still compare two calculations and pay the lower one. A seller who is a non-resident in the year of sale gets one calculation only.

One flat rate now applies to every seller

Before the change, the law worked out a long-term gain on land or a building by raising the original purchase cost with the official inflation index and then taxing the smaller gain at a higher rate. The Finance Act passed that summer removed the inflation adjustment for transfers from the July cut-off onward and brought in a lower flat rate on the plain gain.

The new Income-tax Act, which replaced the old law this April, keeps the same structure. Its section on long-term capital gains taxes a gain on land or a building at the flat rate, worked out on the actual purchase price with no index applied.

For a Mohali home held for many years, this means the whole rise in value is taxed. A flat bought for a modest sum early in the life of a sector and sold today carries a large plain gain, and the flat rate applies to all of it.

Residents kept a second calculation for older homes

When the change was made, Parliament softened it for one group. The income tax department explains on its page on long-term capital gains that resident individuals and resident Hindu undivided families may still apply indexation to land or a building acquired before the cut-off, and pay tax at the old rate if the new law would produce a higher bill.

The new Act carries this forward in a separate sub-section. It works by comparison. The tax at the flat rate on the plain gain is set against the tax at the old rate on the indexed gain, and any excess above the second figure is ignored. The seller pays whichever is lower.

The sub-section opens with the words that decide who can use it: an individual or a Hindu undivided family, being a resident. A seller who is a non-resident for that tax year falls outside those words. For that seller there is no comparison. The flat rate on the plain gain is the tax.

Residence in the year of sale decides it

The test looks at the seller's status for the tax year in which the sale takes place. It does not ask where the seller lived when the home was bought, or where the money came from.

This catches many Mohali owners in a way they do not expect. A couple who bought a plot in the Aerotropolis while living in Punjab, and then moved to Canada, may have owned the same plot for years as residents. If they sell after they have become non-residents, the older calculation is no longer open to them, even though the plot was bought well before the cut-off.

The reverse also happens. An owner who returns to India and is a resident under the Act's residence rules in the year of sale comes back inside the sub-section for that year. Residence under the Act turns on days spent in India and a few related tests, so the status for any one year is a fact to be established for that year alone.

Joint owners can end up in different positions. Where a brother in Mohali and a sister in California sell a family flat together, each pays tax on their own share of the gain. The brother may compare both calculations. The sister cannot.

When the difference matters

The gap between the two routes depends on how far the price has risen against the official inflation index.

Where a home's value has climbed far faster than inflation, the flat rate on the plain gain often works out lower anyway. The lost comparison then costs a non-resident seller little. Where the price has crept up slowly, or barely kept pace with inflation, the indexed route can produce a much smaller taxable gain, and that is where a non-resident seller loses most.

Many Mohali properties fall into the second group. Plots in schemes that took years to develop have often risen slowly. So have flats bought at launch in projects that were later delayed. Owners abroad holding these are the sellers most likely to find that a resident neighbour selling a similar home pays less tax on a similar gain.

The buyer's deduction follows the same rule

When a resident buys a Mohali home from a non-resident, the buyer deducts tax from the price and deposits it. That deduction is worked out for a non-resident seller, and the resident comparison plays no part in it.

The October change to Form 141 altered how the buyer reports the deduction. It did not change the tax the seller finally owes. A seller who thinks the amount deducted is higher than the tax due on the actual gain can apply to the tax department for a certificate allowing a lower deduction before the sale, or claim the excess back in an Indian return after it. Neither route brings back the resident comparison.

The country of residence looks at the same sale

India's tax treaties with the United States and Canada, like its treaty with the United Kingdom, leave India free to tax a gain on a home situated in India. Each of those countries then asks the people it taxes to report the same sale and gives relief for the Indian tax under its own rules.

That relief is measured against the Indian tax actually paid. A non-resident seller who paid the flat rate on the plain gain carries that figure into the foreign return. MA has covered the separate reporting rules for Mohali homes held from [Canada](/article/394-mohali-home-rented-out-counts-toward-canada-s-t1135-limit) and for rent taxed in [the United Kingdom](/article/401-mohali-rent-kept-in-india-is-still-taxed-in-the-uk). How each country treats the sale itself turns on its own law and the seller's own figures.

What stays the same for a non-resident seller

The rest of a sale works as it did before. The registered value of the deed and the collector rate still set a floor for the price used in the calculation. The rules on taking sale money abroad, including the rule that lets the sale money of no more than two homes go abroad by that route, sit in India's foreign exchange law and are untouched by the tax change.

What has changed is narrow. A seller abroad holding a Mohali home bought before the cut-off is taxed under one formula, and a resident holding the same home may use two. For an owner weighing when and from where to sell, that difference is now written into the new Act in plain words.

Related reading

- [Selling A Mohali Property From Abroad: The New TDS Filing Rule For Buyers](/article/348-selling-a-mohali-property-from-abroad-the-new-tds-filing-rule-for-buyers)
- [Remitting Sale Money From A Mohali Home Abroad: Why Only Two Residential Properties Qualify](/article/388-remitting-sale-money-from-a-mohali-home-abroad-why-only-two-residential-properties-qualify)
- [Mohali Home Bought Before Moving Abroad Can Still Be Kept](/article/391-mohali-home-bought-before-moving-abroad-can-still-be-kept)
- [Mohali's Collector Rates Go More Than A Year Without Revision](/article/381-mohali-s-collector-rates-go-more-than-a-year-without-revision-what-the-current-rates-still-decide)

Sources: The sources we use are listed on our Editorial Sources page.

This piece explains how the tax law treats a sale by a non-resident. It gives no tax or legal advice. The tax on any sale turns on the seller's residence for that year and on the facts of that sale.