Bengaluru tax tribunal says airfare may qualify for capital gains deduction if travel is exclusively linked to the property transaction
Non-resident Indians (NRIs) travelling to India specifically to complete the sale of a property may be eligible to claim airfare expenses as a deduction while calculating capital gains tax, the Income Tax Appellate Tribunal (ITAT), Bengaluru bench, has clarified.
The tribunal, however, has stressed that such claims must be supported by documentary evidence establishing that the expenditure was incurred wholly and exclusively in connection with the property transfer.
The ruling came in the case of a US-based NRI who sold a residential property in Bengaluru for Rs 2.63 crore. The taxpayer had claimed Rs 12.01 lakh towards travel and accommodation expenses incurred while completing the transaction.
The Income Tax Department had rejected the claim, arguing that the expenses were not directly linked to the sale.
Examining the records, the tribunal found that a visit undertaken in November 2019, nearly two months before the property registration, could not be treated as an expense connected with the transfer.
However, it accepted that the taxpayer’s January 2020 visit, undertaken around the registration of the sale deed, had a direct connection with the transaction.
The taxpayer had submitted flight tickets for travel between Chicago and Delhi, along with hotel bills for a stay in Bengaluru from January 5 to January 8.
The tribunal noted that the flight tickets also covered another family member. It therefore directed the Assessing Officer to verify the eligible expenses and reconsider the deduction. The entire Rs 12.01 lakh claim was not allowed outright.
The tribunal also permitted Rs 21.60 lakh in previously unclaimed home loan interest to be included in the property’s acquisition cost, along with a one-time maintenance deposit of Rs 2.29 lakh and electricity and water deposits of Rs 1.71 lakh.
The ruling underscores the importance of maintaining flight tickets, hotel invoices, sale documents and tax records when NRIs sell property in India
Tax experts say personal travel, family expenses and visits unrelated to the transaction may not qualify for deduction.
The decision offers guidance to NRIs on capital gains computation while highlighting that any travel-related tax benefit remains subject to verification by the tax authorities.
