NRI Selling Property in India

NRI Selling Property in India

• In comparison to an Indian Resident selling a property in India, an NRI must go through a number of procedures. As a result, it is critical to take the required steps before selling your residential or commercial property in India.
• But how would you avoid such massive tax deductions while still making a profit on your sale? Keep in mind that a single blunder can result in double taxes and other major legal concerns.
• As a result, it is always advisable to get the advice of a qualified consultant before proceeding with the procedure. This can also save you time and assist you in resolving your property issues without requiring any effort on your part.

Sale of Property in India by NRI’s

• Real estate market in India, particularly in growing cities, is one of the many financially rewarding investment opportunities. Many non-resident Indians have purchased residential and/or commercial properties in India for a variety of reasons, including investment.
• The process of managing and selling, disposing of, or reinvesting these assets in India, on the other hand, is a challenge for most NRIs.
• Aside from the practical difficulties of travel and connecting with buyers, the sale of property by NRIs attracts a higher rate of tax deduction at source, thereby locking up much-needed funds in India.
• Taking into account the corresponding tax and regulatory obligations, the sale, reinvestment, and repatriation procedure takes a few months to complete.

Repatriation and Remittance

• The Foreign Exchange Management Act, 1999 (FEMA), read with Reserve Bank of India (RBI) directives, provides for transactions involving the repatriation and transfer to/out of funds from and to India.
• RBI has delegated the authority for the processing of applications and repatriation of funds from India to authorized foreign exchange dealers, banks and/or financial institutions.
• According to RBI directives, ‘repatriation outside India’ includes buying or trying to draw foreign exchange from an authorized dealer in India and remitting it outside India through banking channels or crediting it to a foreign currency account (NRE/ FCNR Account) or an Indian currency account maintained with an authorized dealer (NRO Account) from which it can be converted.
• According to FEMA, a person’s intention to stay in the country, not their length of stay, determines their status as a non-resident. So, regardless of if you are presently resident in India or not, the repatriation of Indian funds or the return of funds to India must be carried out in accordance with the applicable FEMA regulations for investment, family maintenance or other purposes.

The NRI guidelines govern repatriation of NRIs (NRIs), Indian Citizens (OCIs) and Indian Origin Persons (PIOs) are allowed.

• NRIs are allowed to repatriate an amount of one million USD from the balance held in their NRO account/sale proceeds of assets/assets acquired in India via inheritance/ legacy, up to one million per financial period (April to March).
• Repatriation is subject to the submission of necessary documentary evidence to the AD Bank, as well as tax compliance in relation to the amounts being repatriated.
• Remittances out of India require a CA certificate in Form 15CB and a self-declaration by the remitter in Form 15CA (with the exception of certain remittances covered by the RBI’s exemption list).
• Before remittance, AD Bank will require these forms to be submitted online. This is done to ensure that the funds being sent were obtained legally and that all applicable taxes were deducted and paid prior to the transmission.

RJA is a one-stop solution that provides you with a complete and accurate NRI real estate solution package.

• A flowchart depicting the steps involved in an NRI selling property in India is shown below. When selling a property, every NRI must go through these essential steps. Let’s get started.

Finding a buyer:

• The most important duty when selling a property is to find a buyer. An NRI may only sell his or her property to an Indian, another NRI, or a Person of Indian Origin (PIO).
• A property owned by an NRI cannot be sold to a foreigner. Only an Indian can buy agricultural property or a farm from an NRI who has obtained authorization from the RBI.

Agreement to Sell:

• The next step is to sign a sale agreement; What are the most important documents you’ll need to complete your agreement?

Documents pertaining to the acquisition cost:

You must submit documentation pertaining to the property’s initial purchase price, such as a registered sale deed for the acquisition of the property.

·Documents pertaining to improvement costs: Documents such as bills, invoices, and bank statements would be required for improvements or renovations to the existing property. This will be added to the cost and then indexed.

· Certificate of Valuation: If the property to be sold was purchased, acquired, or inherited prior to April 1, 2001, a Valuation Certificate from a certified valuer is required to assets the Cost of the property for Capital Gains purposes.

· PAN (Personal Identification Number): An NRI selling property in India must have a PAN Number, which must be produced at the time of document verification.

· A passport is required: As proof of identity, an NRI should present his passport. He could be an Indian or a citizen of another country.

Aside from this, many other legal documents must be produced during the process, but these are the main documents that an NRI must submit.

Certificate for a Lower Tax Deduction:

• When an NRI sells a property in India, the buyer must deduct TDS at a rate of 20% (plus relevant cess and surcharge) from the transaction price.
• They can apply for LTC (lower tax deduction certificate) based on the intended buyer’s Agreement of Sale to avoid the higher tax rates.

TDS and income tax returns must be filed:

• When selling property in India, the seller must file an income tax return after the end of the fiscal year, i.e. after March 31st.
• TDS returns must also be filed by the buyer of property in order for the seller’s tax deduction to be claimed at the time of income tax filing.
• If the seller is a foreign resident, he must disclose the sale in that country and claim credit for taxes paid in India.

Transfer of cash from buyer to seller and TAN Number:

• The buyer pays the advance and transfers the funds to the seller once the agreement is finalised. In this scenario, the TAN number should be kept on hand by the customer (TAN Number). The buyer is only eligible to deduct TDS or tax at source if he holds a TAN Number.

Property Registration:

• The process of legally transferring your property rights to the buyer is known as registration. It must be legally registered at the office of the sub-registrar.

Rate of TDS on Property sale by Non Resident Indian

• TDS on Sale of Property by NRI is required to be deducted as per the rates mentioned below:-

Capital Gains Nature	Particulars	Applicable TDS Rate on Sale of Property by NRI
LTCG	Immovable Property held for greater than 2 years	20 Percentage
SGST	Immovable Property held for less than Two Yrs	Seller Applicable Tax Slab Rates

• Surcharge & Cess would also be levied on the all the above. So, Effective rate of TDS on property sale by Non Resident Indian in case of LTCG would be as below:

	Particulars	In case Property Sale Price (Rs.)
		Less than 50 Lakhs	50 Lakhs to 1 Cr	More than 1 Cr
	LTCG Tax	Tax  rate 20%	20%	Tax  rate 20%
(Add)	Surcharge	Nil	10% of above	15% of above
	Tax (incl Surcharge)	Tax  rate 20%	22%	23%
(Add)	Health and Ed. Cess	It will be levy @ 4% of above	4% of above	It will be levy @4% of above
	TDS Rate Applicable (including Cess & Surcharge)	20.8%	22.88%	23.92%

	Particulars	Property Sale Price (Rs.)
		1 Cr to 2 Cr	2 Cr to 5 Cr
	LTCG Tax	Tax  rate 20%	20%
(Add)	Surcharge	25% of above	37% of above
	Tax (including Surcharge)	25%	27.4%
(Add)	Health & Ed. Cess	4% of above	4% of above
	Applicable TDS Rate (including Surcharge and Cess)	26%	28.496%

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