How should I file foreign rental income?


I live in India and earn rental income from Australia. Which exchange rate should I consider for filing my income tax return? Also, how is the conversion calculated?

—Name withheld on request


As per the income tax rules (Rule 115), the rate for conversion of income earned in foreign currency shall be TTBR (Telegraphic Transfer Buying Rate) as on the specified date. TTBR is issued by State Bank of India. For converting rental income earned in a foreign currency, the specified date is the last day of the financial year. Therefore, you must consider the TTBR of the last day of the financial year for calculating rental income to be reported in your income tax return that will be filed in India. In case this rental income is directly received by you in a bank account in India, then you should take the amount credited to your account in Indian rupees.


I bought a flat in 2014 for 5 crore in Mumbai. I moved to Canada in 2015 for my job and I am living here ever since. I now wish to sell my property. How will this amount be taxed? Also, is there a way to reduce the tax paid in India?

—Name withheld on request


The calculation of capital gains from the sale of immovable property is similar for NRIs and resident Indians. Gains that arise from the sale of a property held for more than 24 months are considered as long-term capital gains. To calculate long-term capital gains, the cost of the property shall be indexed according to cost inflation index (CII). Any cost of improvement made can also be similarly indexed. This indexed cost of acquisition and indexed cost of improvement shall be reduced from the sale price to arrive at capital gains.

You are allowed to claim exemption from capital gains by investing your capital gains in purchasing a new residential house as per conditions laid down under Section 54 of the Income Tax Act. Under this section, a new residential property must be purchased either one year before or two years after or a new property must be constructed within three years from the date of transfer of the property being sold. You must not sell this newly acquired property within three years of purchase. You can also claim exemption from capital gains by investing your capital gains in specified bonds within six months from the date of transfer of the property.

Archit Gupta is founder and chief executive officer, Clear.in.

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