SM Advisory Services Private Limited

Tax on Investment Income

Listed Securities

NRIs can invest in listed securities under Portfolio Investment Scheme.

Income in the nature of Long Term Capital Gains arising from sale of listed securities is exempt from tax, if transaction of sale is effected on recognized stock exchange of India. To qualify as long term asset- the security should have been held for more than 12 months.

Income in the nature of Short Term Capital Gain (where listed securities are held for a period up to 12 months) is taxed @ 15%.

Capital Gains from Commercial and Residential Property

Long Term Capital Gain on sale of commercial or residential property which is held for a period of more than 36 months is subject to tax @ 20%. Short Term Capital Gain is subject to tax @ 30%.

Rental Income from Properties

Rental income (known under Income tax as House Property Income) is liable to tax as per slab rates which range on a progressive basis from 10% to 30%. Interestingly, Rental income qualifies for ad hoc deduction up to 30% 0f gross rent less municipal taxes. This makes the effective tax rate as 21% on rental income.

Wealth Tax

India taxes unproductive assets such as gold, bullion, precious metals and for wealth tax. House Property let out is not liable to wealth tax, similarly equity and debt securities are also not liable to wealth tax.

Wealth tax is charged at 1% on taxable wealth in excess of INR 3 Million.

Gift Tax

There is no separate gift tax regime, however, gift received from non-relative is subject to income tax as Income from Other Sources.