CGT On Sale Of Residential Property In India

Hi, I am a UK tax resident and have been living in UK for the past 10+ years. Before coming to UK, I had purchased a flat back in 2007 in India, with my wife and me both being joint owners of the flat, and lived there with my family for about 4+ years. I then got an opportunity to come to UK for work and I migrated with my family here. I had purchased the the flat in around 40,000 GBP and spent additional around 7000 GBP in enhancements to the property (kitchen extension, building loft etc). We are planning to sell the flat in next month or so at the price of around 107,000 GBP. My questions are as follows: 1. Given I lived with my family in that flat for 4+ years, do I get any Private Residence Relief while calculating final "gain" amount on which CGT will be applicable? 2. Can I include the expenses I incurred in enhancing the flat (as stated above) as "allowed expenses" while calculating the gain? 3. We will be paying around 23% tax on the sale transaction in India as per Indian taxation law. Does that mean that effectively I will have to pay the additional 5% (28% - 23%, given both my wife and me come under higher tax band) as CGT here in UK, owing to double taxation treaty between UK and India? 4. And if the 23% tax paid in India amounts to a greater figure than 28% tax in UK (mainly because the definition of allowed expenses varies between India and UK), then effectively I will not need to pay anything extra in UK towards CGT given I have already paid enough in India in tax? 5. Even if based on the above calculation, if no additional CGT is applicable in UK, I must still show the Indian figures in my self-assessment? 6. There is every likelihood that the entire sale transaction may span over the months of March / April and we may receive payments in instalments such that some amount comes to us in say March and some in April / May (which will mean that part of transaction occuring in the next financial year). Does this mean I can in theory utilize 6000 GBP Capital Gains tax-free allowance (of this year 2023/2024) as well as 3000 GB Capital Gains tax-free allowance (of next year 2024 / 2025)? Please let me know.

Hi Sapan Desai,
1. Yes you can claim this for the period you lived in the property plus the final 9 months.
2. Yes improvement costs can be deducted from any gain.
3. That is correct.   
4. That is correct.    
5. That is correct.  
6. The year of disposal is the date the contracts are exchanged (date missives are signed) so this can only be 1 date.
If any conditions are applied to the sale then it's when all the conditions are met.
As such only 1 year for annual exemption would apply.
Thank you. 

Thank you so much for providing clarity on these questions. I have an additional question on this subject which I have mentioned below: As mentioned previously, we purchased the apartment in Nov 2007, and lived there until around August 2012. Subsequently, I was made redundant by my previous employer (they were shutting down all operations in the city that we lived back then), and my UK based client offered me to come over to UK for employment. As a result, me and my family migrated from India to UK in August 2012. Following this - almost forced - move out of our India apartment, we had to let the property out to tenants, and between December 2012 and now (Feb 2024), we have almost always had tenants living in that India apartment. Meanwhile, after moving to UK, we lived here as tenants ourselves until buying our own home in Jan 2019. With the above situation in mind, in addition to the period between Nov 2007 and August 2012 (around 56 months) that I will include in my PRR calculation, how many more months can I include as "deemed occupation" of that India apartment? Given I had to move out of the apartment owing to work moving to another country and I did not own my second home (which subsequently became our main residence) in Jan 2019, can I consider period between Aug 2012 to Jan 2019 as deemed occupation?

Hi,

You can see guidance here:

CG65030 - Private residence relief: periods of absence: introduction

Thank you.

Hello, Many thanks for your response. I had gone through that guidance previously as well and my own conclusion was that yes I will be able to claim relief even for the period between August 2012, when I had to vacate the flat, moving to UK for work (having lost the previous job in India), and Jan 2019 when I finally purchased my "main residence" home in UK. Can you please confirm that my understanding is aligned with the guidance? I am just trying to ensure there are no surprises in CGT calculation later. Please let me know what YOU think of my whole situation above which I have articulated in quite detail. Thanks & Regards, Sapan

Hi Sapan Desai,
Please also refer to Capital Gains Manual for conditions that must be met in order for the full period of absence to qualify.
Thank you.