Sale of Property & Repatriation of funds by NRIs

NRIs may have  immovable property in India

  • Acquired when they were residents in India or
  • They might have inherited such assets or received them as gifts or
  • They might have bought them through funds from abroad

If an NRI wants to sell immovable property and remit the funds abroad he can do so easily by following the repatriation rules under the FEMA ( Foreign Exchange Management Act ) and the Income Tax Laws.

Selling Immovable Property

An NRI can sell his residential or commercial property in India to anyone—a resident Indian, an NRI or a PIO (person of Indian origin). However, agricultural land, plantation property and farm houses can only be sold or gifted to an Indian citizen resident in India.

Banker will allow repatriation of funds subject to certain conditions.

  • Any money that was brought in from outside for the purchase of the property can be repatriated. This also includes any home loan repayments done to buy the property. So an equivalent of the amount that came in through normal banking channels, or was paid out of a foreign currency non-resident (FCNR) account or out of a non-resident external (NRE) account, can be repatriated.
  • If the property was bought through source of funds in India, the sale proceeds will be credited to the NRI’s Non Resident Ordinary Account (NRO ).  Each financial year,  an NRI is allowed to repatriate an amount of up to $ 1 million from the balance in his NRO account.

Before repatriation of funds, Banker will ask for a certificate from Chartered Accountant in Form No 3CB and a declaration filed by the NRI in Form No 15CA.

Capital GainsTax on Sale Proceeds

If the property is held for more than 2 years the sale will attract long term capital gains tax at 20.60 % on the Long Term Capital Gain. Gain is computed by deducting Indexed Cost of acquisition ( including improvements ) from the Sale Consideration.

TDS on Sale of Property

Buyer is under obligation to deduct tax at 20 % on the entire sale proceeds if the seller is an NRI. There is no threshold limit and tax is deductible right from Rupee One.

Either the Buyer or the Seller can apply and obtain a certificate from the TDS officer for deduction of tax at Nil rate or at a lower rate.