Living There

October 18, 2018

INDIVIDUAL TAXATION

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Residents of India are subject to tax on their worldwide income. To be considered as a resident for taxation purposes, one should have stayed in the country for 182 days or more within the tax year, or have stayed for 60 days or more within the tax year and an aggregate of 365 days for the preceding four years.

The tax year in India is from 01 April of the current year until 31 March of the succeeding year. The tax year 2018-2019 is from 01 April 2018 to 31 March 2019. The tax year 2019-2020 is from 01 April 2019 to 31 March 2020.

INCOME TAX

Income is classified according to the following: (1) salaries, (2) income from house property, (3) income from a business or profession, (4) capital gains, and (5) income from other sources. Computation of taxable income varies depending on the income classification.

The total income derived from each of the sources is aggregated to arrive at the gross total income. Net taxable income is gross total income less deductions. Income is taxed at progressive rates.

INCOME TAX

TAXABLE INCOME, INR (US$) TAX RATE
Up to 250,000 (US$3,577) 0%
250,000 - 500,000 (US$7,353) 10% on band over US$3,577
500,000 - 1 million (US$14,706) 20% on band over US$7,353
Over 1 million (US$15,873) 30% on all income over US$14,706
Source: Global Property Guide

INCOME TAX FOR SENIOR CITIZENS 60-80 YEARS OLD

TAXABLE INCOME, INR (US$) TAX RATE
Up to 300,000 (US$4,412) 0%
300,000 - 500,000 (US$7,353 10% on band over US$4,412
500,000 - 1 million (US$14,706) 20% on band over US$7,353
Over 1 million (US$14,706) 30% on all income over US$14,706
Source: Global Property Guide

The previous income tax bands and rates are as follows:

INCOME TAX FOR SENIOR CITIZEN OVER 80 YEARS OLD

TAXABLE INCOME, INR (US$) TAX RATE
Up to 500,000 (US$7,353) 0%
500,000 - 1 million (US$14,706) 20% on band over US$7,353
Over 1 million (US$14,706) 30% on all income over US$14,706
Source: Global Property Guide

A surcharge of 5% of the total tax liability is applicable where the total income exceeds INR5 million (US$73,529), and a surcharge of 10% of the total tax liability is applicable where the total income exceeds INR10 million (US$147,059).

Residents are also entitled to the following deductions:

  • Maximum of INR100,000 (US$1,471) for pension contributions, life insurance payments, etc.
  • Maximum of INR15,000 (US$221) for medical insurance premiums
  • Maximum of INR40,000 (US$588) for medical expenses not covered by medical insurance
  • Up to INR75,000 (US$1,103) for physically handicapped taxpayers or for taxpayers with physically handicapped dependents
  • Interests on loans for higher education
  • Repayment of mortgage principal and interest

Education Cess

An education cess of 3% is levied on the total income tax liability.

RENTAL INCOME
Income earned from leasing land, buildings, and furniture is subject to a non-final 15% withholding tax, levied on the gross rent. This tax is credited against the taxpayer´s total income tax liability.

A standard deduction of 30% for repairs and collection charges, interest payments relating to loans used for the construction, acquisition, and repairs of the property are deductible from rental income, which is covered by income from house property.

CAPITAL GAINS
Capital gains realized from selling real property are taxed at the standard income tax rates. Taxable capital gains are computed by deducting acquisition costs and incidental expenses from the gross sales proceeds.

Capital gains realized from real property are subject to non-final withholding taxes, levied on the gross sales proceeds. Short-term capital gains are subject to 10% withholding tax while long-term capital gains (holding period exceeds three years) are subject to 20% withholding tax. This tax is credited against the taxpayer´s total income tax liability.

Wealth Tax

Net wealth tax is levied at 1% on a taxpayer´s net assets if it exceeds INR3 million (US$44,118). Net assets are computed by deducting debts relating to the properties against their aggregate value. The income tax authorities are generally responsible for assessing the property value. Self assessment is also possible but there are interests and penalties for defaults.


PROPERTY TAXATION


Property Tax

There is no comprehensive system of property taxation. Not only does it differ among the states, but it also varies between the municipalities within the states. For leased properties, property tax is levied on the annual rental value of the property. In Delhi, property taxes range from 6% to 10%.

Comments

Jegan | March 03, 2013

Respected Sir,

My father in law stays in a house for 25 yearsand he owns that house but the house was registered in his brothers name, All these years we have been given understanding that this is our house and now his brother tells us to vacate. My father in law is paying the proper property tax to the goverment and electicity bill is in his name only.Just i want to know what are the rights we have on that.
Note : The land is without Patta
Please advice
Thanks,

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