How Can NRIs Sell Their Property in India?

 Many Non-Resident Indians have properties in India. While some buy properties for investment purposes while some others have inherited them. Either way, managing a property in India when one is abroad is challenging, which is why many NRIs opt to sell their properties in India. However, there are various tax laws and regulations to consider before doing so.

NRIs can sell their properties in India to a Resident Indian, another NRI, or a Person of Indian Origin (PIO). NRIs can also rent out their Indian property. However, if an NRI owns agricultural land, they can only sell this to Resident Indians. The income an NRI receives from the transfer of property is taxed under capital gains. Rental income from properties is taxed under ‘Income from House Property.

Before transferring your property, it is necessary to educate yourself on all the laws and regulations to avoid major tax implications.



Tax Liabilities

NRIs are liable to pay taxes when it comes to buying and selling property in India. The Foreign Exchange Management Act (FEMA) implements tax laws for NRIs in India. Transfer date for determining capital investment, agreement value for calculating yields, transfer charges to society, legal charges, outstanding loans are some of the factors to be considered.

TDS on sale of property by NRIs

●      If an NRI sells his/ her property within 2 years of purchase, the NRI is liable to pay short-term capital gains tax as per the NRI’s existing tax bracket.

●      If an NRI sells the property after 2 years of purchase, he/she has to pay a flat 20% capital gains tax.

●      NRIs can repatriate the sales proceeds from property sales in India for up to two properties.

●      The total should not exceed the amount paid for acquiring the estate either via foreign exchange from banks or Non-Resident accounts.

●      This should also not cross foreign currency which is the same as the payment made on a particular date.

The government has simplified the remittance of funds from the sale of property very easily for NRIs.

Tax exemptions

Apart from TDS, NRIs also enjoy tax exemption on capital income from property sales.

Section 54

If an NRI sells a property 2 years after the purchase and reinvests the money from this sale into another property within 2-3 years of selling, the gain from such a transaction will be exempted from the new estate’s cost. However, if gains from the property sale in India are used to buy property abroad, then these benefits will not be valid.

Section 54EC

If an NRI sells a long-term asset the capital gains tax is exempted. When an NRI sells a residential property and invests the capital profits in REC and NHAI bonds within 6 months from the sale date.

A maximum of 6 months is allotted to the NRIs for investing in such bonds after providing valid investment documents to ensure non-deduction of TDS.

Section 80C

NRIs are eligible for tax deduction after repayment of the principal amount on their home loan.

Section 24 (B)

NRIs are allowed exemption on interest paid on a home loan of up to Rs. 2 lakh under Section 24 (B).

Other tips to keep in mind while selling property

●      Do your homework. Always check for the going rate of property in your area before you resell your property. If you’re planning to buy a new property, check for connectivity, social infrastructure, overall safety, and security before going ahead with the purchase.

●      You can always take help from experts. Certified real estate agents and brokers can help you choose the right property without major brokerage charges.

●      Use proper sources to list out your property. Use reputed real estate platforms to spread the word about your property on sale.

●      Once you have zeroed in on a buyer and all the paperwork is done, the amount will be transferred to your NRO Savings Account.

●      If you choose to reinvest the money from the sale into buying another property and need more capital for the same, you may have to opt for a home loan. There are many banks that offer home loans to NRIs at attractive rates. SBM Bank India offers home loans that make the process of buying a new property effortless with end-to-end assistance, best-in-class interest rates, and a plethora of benefits.

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