Saving Mantra Blog: Sale Proceeds of Immovable Property in India for NRIs
Selling property in India as an NRI involves capital gains taxation, TDS, FEMA compliance, and repatriation rules. Understanding these rules ensures legal compliance, tax optimization, and smooth fund transfer abroad.
This guide explains the complete process for NRIs to manage sale proceeds of immovable property in India.
✔ Step 1: Identify Property Type & Holding Period
- Long-Term Property: Held for > 24 months → Taxed as Long-Term Capital Gains (LTCG)
- Short-Term Property: Held for ≤ 24 months → Taxed as Short-Term Capital Gains (STCG)
Why it matters: Tax rate and applicable exemptions depend on the holding period.
✔ Step 2: Compute Capital Gains
Long-Term Capital Gains (LTCG)
- Taxed at 20% with indexation
- Indexation adjusts purchase cost for inflation
- Exemptions:
- Section 54 – Reinvestment in residential property
- Section 54EC – Investment in specified bonds
Short-Term Capital Gains (STCG)
- Taxed at normal income tax slab rates for NRIs
Example:
Property bought for ₹50 lakhs and sold for ₹1 crore after 5 years → LTCG = Sale price – Indexed cost of acquisition.
✔ Step 3: TDS Deduction
- TDS under Section 195 applies to NRIs selling property in India:
- 1% for residential property > ₹50 lakhs
- Higher rates for other property types
- Buyer deducts TDS before making payment
- NRIs can apply for Lower/No TDS Certificate if actual tax liability is lower
✔ Step 4: FEMA and LRS Compliance
- Sale proceeds are subject to FEMA rules for NRIs:
- Repatriation limit: USD 1 million per financial year
- Funds must be transferred via NRO/NRE accounts
- Proof of property ownership and legal compliance required
✔ Step 5: Repatriation of Sale Proceeds
Steps to repatriate funds abroad:
- Ensure TDS has been deducted and tax compliance completed
- Submit Form 15CA & 15CB (certificate from a Chartered Accountant)
- Transfer proceeds via NRO/NRE account
- Follow RBI/FEMA guidelines to stay within the USD 1 million repatriation limit
✔ Step 6: File Income Tax Return
- File ITR-2 for NRIs if no business income; ITR-3 if there is business/professional income
- Disclose:
- Sale proceeds
- Capital gains calculation
- TDS deducted
- Claim TDS credit or refund if applicable
✔ Step 7: Maintain Records
Keep records for 6 years:
- Sale deed and registration documents
- Bank statements showing proceeds
- TDS certificate (Form 16B / Form 26AS)
- PAN, Aadhaar, passport, and NRI proof
- Form 15CA/15CB
These documents are crucial for audit or dispute resolution.
FAQs – Sale Proceeds of Property for NRIs
Q1: Are NRIs taxed on property sale in India?
A: Yes. NRIs pay capital gains tax on property sold in India based on LTCG/STCG rules.
Q2: What is TDS under Section 195 for NRIs?
A: Buyers deduct TDS at 1% for residential property > ₹50 lakhs and at higher rates for other property types.
Q3: Can NRIs repatriate full sale proceeds abroad?
A: Yes, up to USD 1 million per financial year via authorized banks, subject to FEMA compliance.
Q4: What exemptions are available for LTCG?
A: Exemptions under Section 54 (residential property reinvestment) and Section 54EC (capital gains bonds) reduce tax liability.
Q5: What forms are needed for repatriation?
A: Form 15CA & Form 15CB are required for repatriating property sale proceeds abroad.
Conclusion
NRIs selling immovable property in India must manage capital gains tax, TDS, FEMA compliance, and repatriation carefully. Following this step-by-step process ensures legal compliance, smooth fund transfer, and optimal tax planning.
Disclaimer
This blog is for informational purposes only and does not constitute legal, tax, or investment advice. Tax rates, FEMA rules, and repatriation limits may change. NRIs should consult qualified professionals before selling property in India.