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Property Sale in India Property Sale in India

Selling Property In India For NRI

Real estate market in India, particularly in growing cities, is one of the many financially rewarding investment opportunities for Resident Indians as well as NRIs. Many NRIs own residential and/or commercial properties in India for a variety of reasons, including investment. Re-investing or selling property in india for nri is not difficult but comes with certain rules and regulations which are different to that for a Resident Indian, making it complex. The complexity ranges from knowing the procedures, meeting the compliances, paying the correct and minimum taxes, bank account solution for receiving the money, repatriating the funds, following the regulations of RBI, FEMA PMLA and Income Tax Act and so on.

This results in a fair amount of confusion about implication for NRIs who want to sell/ purchase/ manage any house property that they may have in India. We at Dinesh Aarjav & Associates specialize in offering nri property sale services in india a complete solution to the NRIs and individuals from countries other than India, who want to sell their property in India.

Reference links:

Detailed guide for purchasing a property from an NRI

Selling Property In India For NRI

Why Choose us for Selling Property in India for NRI

With presence across 15+ states of India, in addition to being your tax consultants, if required:

We also offer specialized solutions to specific situations like:

  • Sale of property by an NRI to another

  • Sale of property acquired by inheritance

  • Sale of property received as a gift

  • Sale of Agricultural land or farm house

  • Computation of the Tax Liability

    The capital gains from the sale of property by NRIs in India are liable to be taxed in India. The amount of tax depends upon the duration for which the asset has been held by the NRI.

    • If held for more 2 years, Long Term Capital Gai, taxed @20%

    • If held for 2 years or less, Short Term Capital Gain, taxed @slab rate based on NRI’s total incom.

  • Lower/ NIL TDS for NRI Selling Property In India

    In the case of NRI, OCI and Foreign Resident, on sale of property in India, TDS provisions have been specified u/s 195 of Income Tax Act.

    As per this section rate of TDS is 20% of sale consideration if the property is long term capital assets or it is 30% of sale consideration if the property is short term capital assets. As against such proposition under the law, generally on all property sale transactions actual tax liability of the seller is lesser than the proposed TDS amount.

    To overcome blockage of funds, with tax department, income tax law provide for lower deduction TDS certificate also known as TDS exemption certificate u/s 197 of the Act. Such certificate can be obtained by way online filing of form No. 13 to the jurisdictional officer along with requisite documents.

  • Claiming a Refund of the TDS Deducted

    In case an NRI is unable to receive a lower/ NIL TDS certificate, we can still minimize the tax by claiming a Refund. In order to claim a refund of the TDS which is deducted, an NRI has to file an income tax return in India. The tax liability of the NRI is computed and a refund is claimed for the excess of the TDS which is paid by the NRI during the financial year.

  • Tax Exemptions Options

    Depending on the requirement and the financial goal of the individual, there are multiple exemption options available even to the NRIs to minimize their tax liability in case of NRI property sale in India:

    Section 54

    Under section 54, NRIs can claim an exemption on the Long-Term Capital Gain arising from sale of House Property in India. For claiming the same, the amount of capital gains accrued on such sale is to be put to one of the two purposes:

    • Purchase of another residential house one year before or two years after the sale of the house.
    • Construction of a new residential house within three years after the sale of the house.
    • The amount of capital gain which is invested will be exempted from capital gain.

    Section 54 EC

    Another exemption option to save taxes on the sale of property in India is by investing the capital gains amount into the bonds issued by the following entities within a period of 6 months from the sale of property in India:

    • Bonds issued by the National Highway Authority of India (NHAI)
    • Bonds issued by the Rural Electrification Corporation of India (REC)
    • Bonds issued by the Power Finance Corporation Ltd. (PFC)

    These are redeemable after 5 years and must not be sold before the lapse of 5 years from the date of sale of the house property.

    • The amount of capital gains which is invested in such bonds will be exempt from tax.

    Section 54 EC

    The exemption under this section is available against Long Term capital gain accruing from sale of any capital asset other than a residential house property. For claiming the same, the NRI has to purchase a house property, within one year before the date of transfer or two years after the date of transfer or construct one house property within 3 years after the date of transfer of capital asset. Also, the property so purchased should be situated in India and not be sold within a period of 3 years of its purchase or construction.

    • Here the entire sale receipt is required to be invested. If the entire sale receipt is invested then the capital gains are fully exempt otherwise the exemption is allowed proportionately.
  • CA Certificates Like 15CA and 15CB for Remittance of Funds Outside India

    We provide the support in filing the Form 15CA and Form 15CB which are both related to the process of remitting money to a non-resident or a foreign entity.

    • Form 15CA is a declaration of remittance, which is required to be furnished by the remitter (a person making a payment to a non-resident) to the authorized dealer bank (the bank through which the remittance is made) prior to making the payment. This form contains details such as the name and address of the remitter and the beneficiary, the purpose of remittance, the amount of remittance, and the tax deducted at source (TDS), if any.
    • Form 15CB is a certificate by a Chartered Accountant, which is required to be obtained by the remitter from a chartered accountant before making a payment to a non-resident. This form certifies that the payment is not chargeable to tax in India or that the tax has been deducted at the appropriate rate. It also confirms that the remittance is in accordance with the provisions of the Income Tax Act, 1961 and the Double Taxation Avoidance Agreement (DTAA) between India and the country of the non-resident.

Asked Questions

  • Q: When are you considered as a Non-Resident Indian (NRI)?

    A person who is not a resident of India is considered a Non-Resident of India (NRI). You are a resident if your stay in India for a given financial year is: 182 days or more 60 days or more and 365 days or more in the 4 immediately preceding previous years. In case one does not satisfy either of the above conditions, one will be considered an NRI.

  • Q: When should an NRI file his return of income in India?

    An NRI, like any other individual taxpayer, must file return of income in India if gross total income received in India exceeds Rs 2.5 lakh for any given financial year. Further, the due date for filing a return for an NRI is also 31 July of the assessment year or extended by the Government.

  • Q: Is income from rental income taxable in India as well as abroad?

    If there is a rental income in India, then Income tax return needs to be filed in India mentioning the PAN and tax to be paid. Also to note, that though holding one property in India is considered as ‘self-owned’, a second property, even if it is not on rent, is considered ‘deemed rented’ and tax needs to be paid for that. One can, however, show 30% of the deemed rental as ‘maintenance cost’. There is no tax to be paid abroad (say, USA) on ‘deemed’ income, but declaring it is important as during repatriation of funds from India, it should not cause any issue.

  • Q: Is an NRI taxable on the income he receives in India, in his country of residence? What is the role of the Double Taxation Avoidance Agreements (DTAA) here?

    If an NRI receives income in India, such income is taxable in India, i.e. India as a source state has the right to tax such income. However, the country where such NRI is a resident will also have a right to tax such income as it is the residence state. This way, the NRI will end up getting taxed twice on the same income. To overcome this, India has entered into DTAAs with various countries. It will help eliminate double taxation by allowing the taxpayer to claim credit for foreign taxes paid while filing their return of income in the home country.

  • Q: Is Income tax Act applicable only to residents?

    No, The Income tax Act applies to all persons who earn income in India. Whether they are resident or non-resident.

  • Q: How is resident/ non-resident status relevant for levy of income tax?

    In case of resident individuals and companies, their global income is taxable in India. However non-residents have to pay tax only on the income earned in India or from a source/activity in India.

  • Q: I own shares of various Indian companies and receive dividends. Is it taxable?

    Yes, The dividend declared by Indian companies is taxable in the hands of the shareholders at the rate of 20.00% without providing for deduction under any provision of Income Tax Act.

  • Q: I am going out of India. Who will file my income tax return for this period?

    You can authorize any person by way of a Power of Attorney to file your return. A copy of the Power of Attorney should be enclosed with the return.

  • Q: Does an NRI also have to pay advance tax?

    Yes, if an NRI’s tax liability is expected to exceed Rs. 10,000 in a financial year, he must pay advance tax. Interest under Section 234B and Section 234C will be levied if advance tax is not paid.

  • Q: Can NRI / PIO repatriate outside India the sale proceeds of immovable property held in India?

    In the event of sale of immovable property other than agricultural land / farm house / plantation property in India by a NRI / PIO, the Authorised Dealer will allow repatriation of the sale proceeds outside India, provided the immovable property was acquired by the seller in accordance with the provisions of the foreign exchange law in force at the time of acquisition by him or the provisions of these regulations

  • Q: Can a NRI sale immovable property in India without visiting India?

    Yes, NRI can do so by way of executing power of attorney in favor of person residing in India. Such POA must be legalized & apostille in home country & thereafter it must be registered in the state in which the property is located.