For NRI property sale repatriation after selling property in India requires compliance with legal and tax regulations. Understanding these rules is crucial to ensure a smooth and compliant process.
Key Steps for Repatriating Sale Proceeds
- Eligibility for Repatriation: NRIs are allowed to repatriate up to USD 1 million per financial year, including the sale proceeds from up to two properties. This limit applies cumulatively to funds in an NRO (Non-Resident Ordinary) account. The remittance cannot exceed the amount paid through the NRE account at the time of purchase.
- Documentation Requirements: Proper documentation is essential for repatriating funds. NRIs need to provide:
- NRIs or PIOs can repatriate the proceeds from the sale of immovable property inherited from a resident in India, provided they submit documentary proof of inheritance along with the required tax clearance certificates from the Income Tax Authority. The maximum repatriation limit is USD 1 million per financial year.
- Proof of sale and ownership documents, such as the sale deed and title transfer papers.
- Capital Gains Tax: When selling property, NRIs must account for capital gains tax, which differs based on the holding period of the property. Long-term capital gains (property held for more than two years) are taxed at 20%, while short-term capital gains are taxed as per the applicable income tax slab. These taxes must be paid before applying for repatriation.
- TDS on Property Sale by NRI: When selling property in India, NRIs are subject to TDS (Tax Deducted at Source). For long-term capital gains, the buyer is required to deduct 20% as TDS, while short-term gains attract a 30% TDS. However, NRIs can apply for a lower or nil TDS certificate under Section 195 of the Income Tax Act to reduce the withholding tax if the tax liability is lower than the standard deduction. Proper documentation is crucial for doing NRI’s property sale repatriation efficiently.
- Using NRO Account: Sale proceeds from property must first be credited to an NRO account before repatriation. Funds can then be repatriated after tax compliance and documentation checks.
How to Repatriate Smoothly
To avoid any delays, ensure that all documents are properly filed and taxes are paid in full. NRIs can also apply for Form 15CA/CB through a chartered accountant, which certifies that the tax liabilities on the transaction have been met.
How to Avoid TDS on Sale of Property by NRI
One common way NRIs can reduce their TDS liability is by applying for a lower or nil TDS certificate from the tax authorities, based on actual tax liabilities. Additionally, NRIs can reinvest in specified bonds or property under Section 54, which provides capital gains exemptions when reinvesting the proceeds into another residential property or approved bonds.
Conclusion
Repatriating sale proceeds involves understanding the FEMA regulations, capital gains tax, and TDS requirements. NRIs should ensure they follow these steps and consider applying for tax exemptions or a lower TDS certificate to optimize their sale proceeds.
For comprehensive assistance on NRI selling property in India, including managing the tax implications and NRI property sale repatriation , Brivan Consultants offers specialized services to guide NRIs through the process with ease and efficiency.