NRIs are allowed to buy and sell properties in India, and they can also bring the profit post-sale of their property abroad, but there are a couple of things which you need to learn and remember. For example, you need to know that the sale proceeds amount can only be deposited into your NRO account and not on your NRE account. There are many similar points that every NRI should know and remember before selling their ancestral or self-bought properties in India. I have tried to list a couple of them in this article. If you have any suggestion or any other essential things which are not on this list, please suggest in comments.
1) The sale proceeds amount can only be deposited into your NRO account mainly because Indian currencies can only be deposited into the NRO account and not on the NRE account. This then imposes a limitation on how much you can remit to abroad.
2) If you gain a profit by selling your property, e.g., flat or a plot of land in India, then you need to pay capital gain tax on that. It could be either a short-term capital gain or long-term capital gain, depending upon how long you hold the property before selling it.
What Every NRI should know before selling properties in India
Here are a couple of points related to procedures, taxation, and banking-related queries for selling properties in India and remitting the sale proceeds money to abroad.1) The sale proceeds amount can only be deposited into your NRO account mainly because Indian currencies can only be deposited into the NRO account and not on the NRE account. This then imposes a limitation on how much you can remit to abroad.
2) If you gain a profit by selling your property, e.g., flat or a plot of land in India, then you need to pay capital gain tax on that. It could be either a short-term capital gain or long-term capital gain, depending upon how long you hold the property before selling it.
For example, if you sell the property within 3 years of purchase, then you have to pay short term capital gain tax, which is taxed at a rate of your income slab rate. On the other hand, if you have sold your property after 3 years, you have to pay long term capital gain tax, which is taxed at a rate of 20% of the profit.
3) You should also remember that long-term capital gain is taxed at a profit after considering the indexation, i.e., if you bought the property on 10 lakh on 2001 and sold it on 70 lakh in 2016 then you don't have to pay tax on 60 lakh profit at 20%; instead, you first calculate the profit using indexation and later pay fee on that. You can see this post for the exact formula for computing long term capital gain tax on property profit.
4) You can remit the money you got from the sale of your property abroad from your NRO account, but you need to do some paperwork. First, you would need to provide the bank with a certificate from an Indian Chartered Accountant. This certificate is to be delivered in prescribed Form 15CB. You would also need to fill out Form 15CA.
This Form 15CA, also known as the ‘undertaking,’ requires the remitter to furnish specific specified details (like the name of the bank to which the money is to be credited, etc.) regarding the proposed remittance. The information to be furnished in Form 15CA is to be filled using the information contained in Form 15CB (certificate).
Form 15CA has to be then uploaded on www.tin-nsdl.com. The remitter will then take a print out of this filled up Form 15CA (which will bear an acknowledgment number generated by the system) and sign it.
The duly signed Form 15CA (undertaking) and Form 15CB (certificate) have to be submitted to the bank, who will, in turn, forward a copy of the certificate and undertaking to the Assessing Officer concerned.
Once this is done, the funds may be remitted abroad. Please note that though the procedure seems complicated at first glance, it basically amounts to filling out of two forms, one of which will be done by the chartered accountant concerned. The other one has to be filled online and then printed out with the system generated acknowledgment number. Submission of both these documents is all that is needed to effect the remittance.
5) NRIs can also save tax on long term capital gain by investing the total amount of capital gain for purchasing another residential property or by buying capital gains related to Bonds of REC or NHAI.
That's all about some of the essential points every NRIs should remember while selling properties in India. Buying and selling properties are very hectic work, and it becomes even more hectic if you are living abroad. You want to transfer the money you got after selling your flat or property abroad to buy a new feature there or just to save for your retirement. If you know some of these things in advance, it helps to plan and prepare better.
3) You should also remember that long-term capital gain is taxed at a profit after considering the indexation, i.e., if you bought the property on 10 lakh on 2001 and sold it on 70 lakh in 2016 then you don't have to pay tax on 60 lakh profit at 20%; instead, you first calculate the profit using indexation and later pay fee on that. You can see this post for the exact formula for computing long term capital gain tax on property profit.
4) You can remit the money you got from the sale of your property abroad from your NRO account, but you need to do some paperwork. First, you would need to provide the bank with a certificate from an Indian Chartered Accountant. This certificate is to be delivered in prescribed Form 15CB. You would also need to fill out Form 15CA.
This Form 15CA, also known as the ‘undertaking,’ requires the remitter to furnish specific specified details (like the name of the bank to which the money is to be credited, etc.) regarding the proposed remittance. The information to be furnished in Form 15CA is to be filled using the information contained in Form 15CB (certificate).
Form 15CA has to be then uploaded on www.tin-nsdl.com. The remitter will then take a print out of this filled up Form 15CA (which will bear an acknowledgment number generated by the system) and sign it.
The duly signed Form 15CA (undertaking) and Form 15CB (certificate) have to be submitted to the bank, who will, in turn, forward a copy of the certificate and undertaking to the Assessing Officer concerned.
Once this is done, the funds may be remitted abroad. Please note that though the procedure seems complicated at first glance, it basically amounts to filling out of two forms, one of which will be done by the chartered accountant concerned. The other one has to be filled online and then printed out with the system generated acknowledgment number. Submission of both these documents is all that is needed to effect the remittance.
5) NRIs can also save tax on long term capital gain by investing the total amount of capital gain for purchasing another residential property or by buying capital gains related to Bonds of REC or NHAI.
That's all about some of the essential points every NRIs should remember while selling properties in India. Buying and selling properties are very hectic work, and it becomes even more hectic if you are living abroad. You want to transfer the money you got after selling your flat or property abroad to buy a new feature there or just to save for your retirement. If you know some of these things in advance, it helps to plan and prepare better.
Helpful article! How do these rules change if the property sold by an nri was received through inheritance? For e.g., does the tax basis change?
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