How Can NRI Sell Property in India – A Guide With Rules, Regulations, & Process

Hello there! So, here’s a small tip regarding selling property in India as an NRI under the Act of 1999, you’ll need an exception. When you plan to sell your house or a booming commercial space, make sure you have a resident of India, another NRI, or a Person of Indian Origin (PIO) with you. 

It’s like having a network of peers for your real estate transactions. The good aspect is that once the sale is completed and you have your hard-earned cash in hand, you may transfer it back to your home soil. 

This magical process is known as “repatriation” – it’s essentially the secret to carrying your sale proceeds with you no matter where you plant your roots next. As a result of this legislation, NRIs are free to sell and go on with their property proceeds securely hidden away in their pockets. How’s that for making real estate deals feel effortless?

How can NRI sell property in India – a guide with rules, regulations, & process

Explaining the procedure for NRI to sell property in India

If you are a Non-Resident Indian (NRI) and wish to sell your property in India, whether it is a house, a business, or any other form of property, you can do so because there are numerous options available in properties in Indian real estate. However, some ground rules must be followed. 

Understand tax law and discuss guidelines as an NRI while selling property in India. In India, you can sell your property. You must pay capital gains tax on any profits you make.

Rules for NRIs, selling property in India

If you’re an NRI who wants to sell your property in India, you have some flexibility. You can sell it to someone living in India, another NRI like yourself, or even to a Person of Indian Origin (PIO). It means you have options to find a buyer for your residential or commercial property.

Verify NRI status 

 If you qualify as an NRI according to RBI guidelines,  you can sell your property in India.

Tax compliance for NRIs, selling property in India

When you sell a property in India, there are some costs you need to consider, like the fees for the real estate agent. You also have to pay tax on the money you make from the sale, called capital gains tax. 

If you are an NRI selling property in India, the buyer has to keep a part of the money (20% of the profit) as tax, known as TDS (Tax Deducted at Source). If you’ve owned the property for less than 2 years, the capital gains tax rate may be higher at 30%. (ClearTax)

Documents for selling a property by an NRI

When an NRI decides to sell property in India, they usually need specific documents to make the transaction happen smoothly. Here are some documents required for selling a property to an NRI in India.

Passport

If you’re an NRI looking to sell a property in India, you need a passport— it doesn’t have to be an Indian one. This passport acts as your identification in the transaction. If you’re an OCI or PIO, your passport serves the same purpose.

PAN card 

Most NRIs don’t pay taxes in India as they are taxed where they live. But, if an NRI plans to sell property in India, experts advise getting a PAN card. This card is necessary to apply for a tax exemption certificate after selling the property. NRIs from certain foreign countries can get a PAN number.

Power of attorney

If NRIs can’t be in India to sell property, they can give their friend or relative the power to act on their behalf. It means the friend or relative can handle everything, sign papers, and make decisions for them. The agreement, called Power of Attorney (POA), can cover things or just specific tasks.

Tax returns

If an NRI has owned a property for some time and made money from it, like renting it out, they may have to pay taxes. In such cases, it’s to keep all the tax records for the whole time they owned the property.

Address proof 

If an NRI wants to show where they live in India and abroad, they need to provide some documents. It can be like a ration card, phone or electricity bills, or life insurance policy statements. These same papers are needed to prove where they live outside India.

Sale deed 

When an NRI sells property in India, an essential document is the sale deed. This document is crucial as it proves ownership. The sale deed is a legal agreement that the NRI signs when selling their property in India.

Allotment letter 

If you have a letter of allotment from a society, builder, or relevant authority, it means they’re officially giving you the property.

The approved building plan and occupation certificate

To sell a property, you need a copy of the approved building plan. The occupation certificate, provided by the builder or building society, shows that the apartment has been occupied.

Encumbrance certificate

An encumbrance certificate is like a safety check for the buyer. It ensures that the land or property has no pending dues to any legal authority. This is crucial whether you’re buying a house, an apartment, or land. Also as a NRI, you should know property transfer charges which are applicable in India.

If you want any guidance related to the procedures involved in the selling of property by NRI, contact the property expert at PropertyCloud to get the best guidance in an easy method.

Processing of selling a property by an NRI

• Evaluate your property’s value or hire a broker. 
• If absent, give someone Power of Attorney. 
• Understand tax liabilities.
• Short-term gains tax within 2 years, long-term gains tax at 20% after 2 years. 
• For a resident Indian buyer, deduct 20% TDS on long-term gains, or 30% if sold before 2 years. 
• Inherited property considers the original owner’s purchase date for tax calculation.

Can NRI sell agricultural land in India?

NRIs are not allowed to sell agricultural land in India. They can only sell residential and commercial properties. that rules can change, so it’s best to check the latest guidelines from the authorities or ask experts for up-to-date information.

NRI tax implications, capital gains on property transactions in India

When you sell a residence in India as an NRI, you will be subject to Capital Gains Tax. The tax you pay now determines whether you have a short-term or long-term gain. If you’ve owned the property for more than two years (due to a reduction from three years in Budget 2017), it’s considered a long-term capital gain. 

Is there anything less than two years? That is your short-term gain. And, by the way, this tax applies to both purchased and transferred properties. Remember that if you purchased the property, the clock starts ticking from the original owner’s purchase date, and their purchase price serves as the starting point for cost calculations. 

On the other hand, understanding these tax specifics offers a smoother journey through the property complex for you as an NRI. Practical steps that are involved in buying a house in India.

How to reduce capital gains taxes

When it comes to selling real estate in India, NRIs may smile. They are qualified to get long-term capital gains exemptions from the sale of residential property under Sections 54 and 54EC. 

Section 54 is a long-term capital gain exemption

Let us certainly go over the Section 54 exception for you as NRIs selling property. This clause applies where there is a long-term financial gain from the sale of a home, whether it is self-occupied or rented out. It is critical to note that you are not required to reinvest the entire sale receipt instead, the focus is on the amount of capital gains. 

While the purchase price of the new property may be greater than the capital gains, keep in mind that your exemption is limited to the total capital gain from the sale. This controlled approach guarantees that NRIs can strategically use the exemption while remaining within the constraints of the established legal framework, allowing them to make informed judgments in their property transactions.

It is noteworthy that you have the choice of purchasing a new property either one year before or two years following the sale of your present property. Furthermore, if you decide to build a home, the construction must be completed within three years of the date of sale to qualify for the exemption. 

It’s vital to remember that the 2014-15 budget included a clarification stating that only one house property can be purchased or built using capital gains to qualify for this exemption. This precise guideline assures clarity and adherence to the mentioned limits, allowing you as an NRI to operate with confidence. 

Since the assessment year 2015-16 (or fiscal year 2014-15), there has been an important mandate that the new house property must be located in India to qualify for the exemption. This exemption does not apply to properties purchased or built outside of India. It’s critical to understand that this exemption can be dismissed if you sell the new property within three years of purchasing it. 

There is, however, a practical provision for people who were unable to invest their capital gains until the deadline for filing the return (typically the 31st of July). Under the Capital Gains Account Scheme, 1988, you can deposit your gains in a PSU bank or other authorized institutions. 

You can avoid paying tax on these gains by listing them as an exemption on your return, which provides a tactical way to manage your capital gains.

Section 54F exemptions for NRIs when selling long-term capital assets

Of course, when you as an NRI sell a long-term capital asset other than a residential residence, they are exempt under Section 54F. The NRI must use the capital gains to buy or build a home within certain timeframes to be eligible for this benefit. You should have a piece of knowledge about how NRI can buy a property in India 

Construction must be finished within three years of the transfer date, however, the purchase can be done either one year before or two years after the transfer date. Crucially, the new home must be situated in India and cannot be sold for three years after it is acquired or built. 

Through the use of this provision, you as a non-resident individual (NRI) can strategically optimize your tax liability when you engage in capital asset transfers. You as a NRIs need to meet specific requirements to be eligible for the exemption under Section 54F. First off, apart from the new property purchased for exemption, you shouldn’t own more than one residential property. 

Furthermore, you shall not develop another residential property for three years, nor shall it be purchased by another NRI within two years of the date of transfer. This guarantees that the prohibition is applied according to legal housing requirements. It is noteworthy that to be eligible for complete exemption, the entire sale receipt must be invested. 

Capital gains are exempt if the entire sale receipt is invested, if not, the exemption is given correspondingly. These requirements make it more strategic to use this exemption and force you as an NRI to arrange your finances carefully.

If you want any guidance related to loans, tax, etc, contact PropertyCloud loan experts to get the best guidance with easy steps.

An overview of the TDS deduction for NRI property sales

When you as an NRI selling property in India, you must be aware of the implications of Tax Deducted at Source (TDS). The buyer must deduct TDS at a rate of 20% from the sale proceeds. If the property is sold within two years of the purchase date, the TDS rate rises to 30%. 

This TDS method guarantees that the tax side of real estate transactions involving NRIs is addressed immediately while ensuring transparency and respect for regulatory standards. It is a typical technique that is critical in the financial aspects of the property transaction.

TDS deduction for NRI property sales

The property buyer is responsible for deducting the TDS payment, which must be sent to the NRI seller after deducting the TDS. The procedure is as follows:

• To deduct TDS, the property buyer must apply for and be granted a TAN (Tax Deduction Account). Each person must get a TAN if numerous persons buy the property together and invest money through joint financing.

• Following receipt of a TAN, the buyer must deduct TDS from each payment made by you as an NRI seller.

• The TDS amount deducted must be paid to the Income Tax Department by e-challan by the 7th day of the month following your payment as an NRI seller.

• The buyer is required to file the TDS return in the next quarter after donating the TDS money.

• After filing the TDS return, the buyer can download Form 16A and give it to you (NRI)

Methods to minimize TDS payments

In property transactions involving an NRI and TDS, you have the option of reducing the deduction burden.

• You as a seller in property transactions might reduce overall TDS liability.

• Obtaining a NIL/lower deduction certificate from the Income Tax Department allows you as an NRI seller to have TDS deducted at a reduced or nil rate, as specified in the certificate.

• You should apply for this certificate in advance of signing the property selling agreement.

• TDS is calculated by the assessing officer based on capital gains, ensuring a fair and precise deduction.

• You can claim a refund if their TDS exceeds their actual tax payment, giving a practical approach to reconciling deductions with tax obligations and potentially saving money on excess TDS amounts.

Complete guidelines about NRIs selling property in India

NRIs can invest in the Indian real estate market, albeit with certain conditions and regulations. Investing in real estate in India can be profitable for NRIs, but it’s crucial to understand the rules and processes. Stay informed about eligibility, financing, property management, resale, and taxes to make smart decisions. 

This guide aims to answer common questions for NRIs buying or NRIs selling property in India, but always consult with legal and financial experts for a smooth experience. For getting expert advice on selling property procedures, you can connect with the PropertyCloud brokers’ team and get the best advice from the best property expert.