Saving Mantra Blog: Step-by-Step Process for Selling Property for NRI in India
Selling property in India as an NRI requires careful planning to comply with Income Tax, TDS, FEMA, and repatriation regulations. Proper understanding ensures legal compliance, optimized taxes, and smooth fund transfer abroad.
This guide provides a step-by-step process for NRIs to sell property in India efficiently.
✔ Step 1: Determine the Type and Holding Period of Property
- Residential property: House, apartment, or plot
- Commercial property: Office, shop, or warehouse
- Holding period:
- Long-Term Capital Gains (LTCG): Held >24 months
- Short-Term Capital Gains (STCG): Held ≤24 months
Why it matters: Determines applicable capital gains tax rate and exemptions.
✔ Step 2: Compute Capital Gains
- LTCG Tax: 20% with indexation for properties held >24 months
- STCG Tax: Taxed at NRI slab rates for properties held ≤24 months
- Exemptions available under:
- Section 54 (reinvestment in residential property)
- Section 54EC (investment in capital gains bonds)
✔ Step 3: TDS Deduction
- TDS applies to NRI sellers under Section 195
- Deductor (buyer) deducts TDS:
- 1% for residential property above ₹50 lakhs
- Higher rates for other categories
- NRIs can apply for Lower/No TDS Certificate if actual tax is lower
✔ Step 4: FEMA Compliance
- Ensure compliance with Foreign Exchange Management Act (FEMA):
- Funds must be transferred via NRE/NRO accounts
- Only proceeds from legally acquired property in India can be repatriated
- Repatriation limit: USD 1 million per financial year
✔ Step 5: Repatriation of Sale Proceeds
Steps for transferring funds abroad:
- Deduct TDS and pay applicable taxes
- Submit Form 15CA & 15CB (from a Chartered Accountant)
- Transfer proceeds via NRO/NRE account
- Follow RBI/FEMA guidelines for repatriation
✔ Step 6: Legal Documentation
- Sale deed and registration with Sub-Registrar
- Encumbrance certificate to ensure clear title
- PAN card, Aadhaar, passport, and NRI proof
- TDS certificates and bank statements
Tip: Hire a legal expert for smooth property transfer.
✔ Step 7: File Income Tax Return
- Report property sale in ITR-2 (NRIs with no business income)
- Include:
- Sale proceeds
- Capital gains calculation
- TDS deducted
- Exemptions claimed
- Filing ensures TDS credit or refund
✔ Step 8: Maintain Records
Keep records for 6 years:
- Sale deed, registration, and property documents
- TDS certificates (Form 16B / Form 26AS)
- Form 15CA/15CB
- Bank statements showing credited sale proceeds
FAQs – Selling Property for NRIs in India
Q1: Are NRIs taxed on property sale in India?
A: Yes. NRIs pay capital gains tax depending on holding period and exemptions.
Q2: What is TDS under Section 195?
A: Buyers deduct TDS at 1% for residential property above ₹50 lakhs; higher rates apply for other property types.
Q3: Can NRIs repatriate the full sale proceeds abroad?
A: Yes, up to USD 1 million per financial year, subject to FEMA compliance.
Q4: What exemptions are available on LTCG?
A: Exemptions under Section 54 (residential property reinvestment) and Section 54EC (capital gains bonds).
Q5: What forms are needed for repatriation?
A: Form 15CA & 15CB are required to transfer property sale proceeds abroad.
Conclusion
Selling property in India for NRIs requires careful capital gains computation, TDS compliance, FEMA adherence, and proper repatriation planning. Following this step-by-step guide ensures legal compliance, smooth fund transfer, and optimal tax management.
Disclaimer
This blog is for informational purposes only and does not constitute legal, tax, or investment advice. Tax laws, FEMA regulations, and repatriation rules may change. NRIs should consult qualified professionals before selling property in India.