For NRI’s, outward remittance from India proceeds from sale of property that requires compliance with legal and tax regulations. Understanding the rules for NRIs remitting property sale proceeds from India is crucial to ensure a smooth and compliant process.
Key Steps for Remitting Sale Proceeds
- Eligibility for Remittance: NRIs are allowed to remit 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 remitting funds. NRIs need to provide 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. Taxes must be paid before remittance.
- 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.
- Using NRO Account: Sale proceeds from property must first be credited to an NRO account before remittance. Funds can then be remitted after tax compliance and documentation checks.
How to Remit 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.
Conclusion
For NRIs remitting property sale proceeds from India,, understanding the distinction between resident accounts (NRE and NRO) is key. While NRO accounts handle funds from Indian income, including property sales, funds can only be remitted after tax compliance is ensured. Conversely, NRE accounts allow free remittance, but only equal to the investment made from a foreign country which came through the NRE account. NRIs should carefully choose the right account, ensure accurate documentation remitted, and leverage tax exemptions or lower TDS certificates for smooth remittance. Consulting a tax expert ensures compliance and optimizes the remittance process.
Brivan Consultants offers expert services in NRIs remitting property sale proceeds from India, providing personalized solutions that ensure a smooth and compliant transaction process.
