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I am a beneficiary, along with four others, of an ancestral property whose profits are to be divided into five equal parts. We have entered into a Joint Venture agreement with a local builder to develop this land into apartments, and each of us will receive one apartment in lieu of the land. I am a foreign citizen (UK) with an OCI, while all the others are Indian citizens. The developer claims, based on their lawyer’s advice, that I, being a foreign citizen, will have to pay a tax each time one of the apartments is sold. There will be 16 apartments, and the developer suggests that I will need to pay tax each time one is sold. Is this correct? I understand that I will be liable for Capital Gains Tax if I sell the apartment I receive as part of my share, but is there any additional tax liability for me as a foreign citizen with an OCI?
As an OCI holder, you will pay Capital Gains Tax when you sell your share of the apartment, based on the profit. However, you are not liable for taxes on the sale of other apartments by the developer. Consult a tax professional to ensure full compliance with Indian tax laws, including potential relief under the UK-India tax treaty. For further legal assistance contact us on our helpline number.