Introduction
As an NRI, selling their property in India can be a complex process—navigating legalities, taxation, and ensuring gets you the best return on your investment.
An NRI can sell immovable property in India to Indian Citizens, Other NRI’s, PIO (Person of Indian Origin), Foreign Nationals of Indian Origin.
However, NRI’s cannot sell agricultural land or Plantation property in India unless they have acquired it by inheritance or a will.
What NRIs Need to Know Before Selling Property in India: –
When an NRI (Non-Resident Indian) decides to sell property in India, it’s more than just a transaction. It’s a significant decision that involves various considerations. Selling property entails analysing market conditions, understanding income tax implications, and addressing the repatriation of funds to the home country, among other key aspects. Let’s take a closer look at the typical considerations NRIs face in such situations.
1. Tax Deduction at Source (TDS):
When selling property in India, it’s vital to clarify your residential status to the buyer, whether you’re a resident or an NRI (Non-Resident Indian). For residents, the buyer deducts TDS at a 1% rate on the sale price is Rs 50 lakhs or more. This TDS is deposited using Form 26QB under section 194IA of the Income Tax Act, 1961.
The table below summarises the effective rate of TDS for different income levels of NRIs in India.
| Particulars | LTCG | STCG | ||
| Total income is less than ₹50 lakh | Total income is between ₹50 lakh and ₹1 crore | Total income is more than ₹1 crore | ||
| Capital Gain Tax Rate | 12.5% | 12.5% | 12.5% | As per the applicable IT Slab Rate |
| Add: Surcharge | Nil | 10% of the above tax | 15% of the above tax | As per the applicable IT Slab Rate |
| Total Tax Rate | 12.5% | 13.75% | 14.38% | |
| Add: Health and education cess | 4% of the total tax rate | 4% of the total tax rate | 4% of the total tax rate | 4% of the total tax rate |
| Effective TDS Rate | 13% | 14.3% | 14.95% | To be ascertained as above |
Unfortunately, many NRIs either intentionally or unintentionally fail to disclose their residential status to buyers. This lack of transparency, combined with buyers’ unfamiliarity with TDS rates, often leads to complications. When a buyer incorrectly deducts TDS at a 1% rate for an NRI seller, legal issues may arise, creating challenges for both parties.
Buyers must verify the seller’s residential status before finalizing the transaction to avoid such pitfalls. Some sellers may withhold this information due to higher TDS rates for NRIs or a lack of awareness about lower TDS certificates.
2. Lower Deduction Certificate:
There is an option available to NRIs to apply for a Lower TDS Certificate using Form 13, which allows them to apply for a reduced TDS rate applicable to their specific circumstances.
The Lower TDS Certificate application process can be time-consuming and complicated, especially for NRIs who may have limited time in India, typically around 7-10 days during their visits. Delays can also occur due to jurisdictional issues, and the documents submitted may not always satisfy the assessing officer responsible for granting the Lower TDS Certificate. The documents required are often complex, requiring a detailed understanding of property transactions, such as property taken on lease, joint ownership cases, valuation of flats, cost of acquisition, cost of improvement, and circle rates. These complexities can make it difficult for NRIs to communicate effectively with the assessing officer through online replies, as there is no option for virtual hearings.
3. Capital Gains:
When you plan to sell your Real Estate investment property in India and if there is any realized capital gain on it the property shall attract capital gains tax based on the period of holdings.
Long-Term Capital Gains (LTCG)– Property held for a period of more than 2 years from the date of purchase.
In this case, a TDS Rate of 12.5% applies without any Indexation benefit.
Short-Term Capital Gains (STCG)– Property held for a period of Less than 2 years from the date of purchase.
In this case, a TDS Rate of 30% applies.
If you consider selling an inherited property then the date of purchase is the date of purchase made by the original owner and the cost of property is the price at which the original owner bought the house.
4. Repatriation of Funds by NRI from Sale Proceeds of Property
Repatriation of funds by Non-Resident Indians (NRIs) from the sale proceeds of property in India involves specific procedures and compliances under Indian tax and foreign exchange regulations. One of the key requirements is the submission of Form 15CA and Form 15CB. Let’s go into the details:
NRIs who sell property in India and wish to repatriate the sale proceeds abroad need to follow certain guidelines laid down by the Reserve Bank of India (RBI) and the Income Tax Department of India. Correct RBI code is mandatory to fill in the Form 15CA and 15CB for repatriation of funds by NRI.
Form 15CB: Before filling Form 15CA, the NRI should obtain Form 15CB from a Chartered Accountant. The CA will verify the nature of the remittance and the applicable tax rate.
Form 15CA: After obtaining Form 15CB, the NRI can proceed to fill Form 15CA online through the Income Tax Department’s website. This form requires details like the PAN, remitter and remittee details, nature of remittance, and amount of remittance.
Repatriation of funds from the sale proceeds of property by NRIs involves adherence to specific regulations, including the submission of Form 15CA and Form 15CB. It is advisable for NRIs to consult with a tax advisor or Chartered Accountant to ensure compliance with all applicable laws and regulations. The seller can repatriate up to USD 1 million per financial year outside India.
5. How Can NRIs Sell their Property in India?
For those NRIs who can’t be physically present in India to sell property, NRIs have an option to give Power of Attorney (POA) to their friends or relatives and allow them (legally) to complete the transaction on your behalf. They will be signing agreements and other official documents on your behalf.
The POA can be general or specific about the rights your representative can exercise. You need to get the POA document notarized and attested by the Indian consulate of your country of residence and then send it to the POA in India. The POA document should also be stamped and registered in India within three months of its execution.
6. Currency Fluctuations:
Exchange rate fluctuations can impact the repatriation amount received by the NRI when converting Indian Rupees to their home currency. Monitoring currency trends and considering hedging strategies can help mitigate the risks associated with currency fluctuations.
7. Investment Opportunities:
After selling property in India, NRIs may explore various investment opportunities both in India and abroad. Whether it’s reinvesting in real estate, stocks, or other financial instruments, careful planning can help maximize the returns on the sale proceeds. NRI can save taxes as per income tax rules for NRI while selling a property under section 54, section 54EC, and section 54F. There are various eligibility, lock-in period and exemption.
Why Choose Us?
- Expertise in NRI Property Matters With years of experience, we are well-versed in the challenges faced by NRIs when selling property in India. Our Chartered Accountants have in-depth knowledge of Indian property laws, tax regulations, and the complexities of international financial transactions.
- Customized Solutions for NRIs We understand that every NRI’s situation is unique. Our services are tailored to your individual needs, whether you’re selling a single property or managing multiple assets across India.
- Comprehensive Tax Planning Our CA firm not only assists you with property sales but also ensures that your financial planning is optimized for the long term. From tax strategies to managing repatriation of funds, we offer complete solutions to safeguard your wealth.
- Transparency and Integrity We are committed to providing you with transparent and honest advice. No hidden charges, no surprises—just reliable, professional service at every step.
Let us help you make informed decisions and ensure smooth property transactions in India.
