How are property sale proceeds taxed for a resident but not ordinarily resident? | Mint

I have been living in Dubai for the past 15 years. I visit India during festivals like Diwali and don’t stay longer than a month a year. However, now I plan to spend my retired life in India. I will come back in mid-2025. After two to three months of settling down, I will sell my Dubai villa and invest in properties in India instead. Will I be taxed in India for selling my Dubai villa after I settle in here?
-Name withheld on request

Your tax liability in India will depend on your residential status for the fiscal year 2025-26, which is determined based on your duration of stay in India. Since you plan to return to India in mid-2025 and presumably will spend more than 182 days in the fiscal year 2024-25, you will qualify as a resident of India for 2025-26. However, based on your facts, assuming that you were a non-resident of India (NRI) in at least nine out of 10 preceding fiscal years and also that you haven’t stayed in India for more than 729 days in the seven preceding fiscal years, you would qualify as a resident but not ordinarily resident (RNOR).

As RNOR, only income that is received, deemed to be received, accrues, arises or is deemed to accrue or arise in India is taxable. However, any income that accrues or arises outside India is not taxable unless it is derived from a business controlled in or a profession set up in India.

The income that you will earn from the sale of immovable property in Dubai will be in the nature of capital gains rather than business income as there will be no business activities involved in generating that income. Its place of accrual will be outside India since the right to receive the income originates outside India. Also, the source of income lies outside India. If you receive the income outside India and later transfer the proceeds to your Indian bank account, the place of receipt will be outside India, and the income will not be taxable in India while you are an RNOR.

However, if you directly receive the income in your Indian bank account, then India will be the place of receipt of your income. Under this situation, the income could become taxable in India.

A resident is obligated to disclose their foreign assets, which they have held at any time during the calendar year 2025, in their income tax return for 2025-26. However, as an RNOR, you will not be obligated to report them.

Harshal Bhuta is partner at P. R. Bhuta & Co., Chartered Accountants.