I am an NRI in Canada. My ancestral property is being sold in India. What can I do to save tax?

financialexpress.com:

Mrinal Mitra is an NRI living in Canada. Recently, he shared with us that his ancestral home in Kolkata is being sold and he is expecting his part to be around Rs 15 lakh. Mrinal said the money will be deposited in a joint account with his daughter in State Bank of India, New Delhi. However, his daughter is still a student in Canada.

Mrinal wanted to know what could he do with the money received from the sale of his ancestral property to avoid long-term gain tax (if there is any). Also, can he invest the money in any SBI plan?

Shruti K.P, Partner, INDUSLAW, has answered Mrinal’s queries:

We assume that the ancestral property referred to here was a residential house property inherited by you and is a long-term asset due to the period of holding of the previous owner also being included. Note that for the purpose of computing taxable capital gains, as per the Income-tax Act, 1961 (“ITA”), you may be eligible to claim a deduction of the cost for which the previous owner of the property had acquired it, proportionately to the extent of your share. You may also be eligible for indexation benefits.

Note that to save on long-term capital gains tax, you may either invest in a residential house property (“RHP”) in India under Section 54 of ITA or invest in specified long-term bonds in India as per Section 54EC of ITA.

Per Section 54 of the ITA, you may invest the amount of the capital gains for purchasing a new RHP in India within 1 year before the transfer, or within 2 years from the date of transfer or by constructing a new RHP in India within 3 years from the date of transfer.

Also Read: Sold ancestral property? Know the rules for parking or investing sale proceeds to save tax

If the amount of the capital gains is not