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Introduction
Selling ancestral property as an NRI might feel overwhelming. With legal paperwork, tax implications, and potential delays, it’s essential to approach the process wisely. Many NRIs wonder about the best way to sell such property while minimizing taxes and avoiding unnecessary hassle.
This guide breaks it down into simple steps to help you sell your ancestral property smoothly and transfer the funds abroad with ease.
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Scenario 1: If Your Parents Are Also NRIs
If your parents are non-residents like you, the best approach is for them to sell the property instead of transferring it to you first. This saves time and prevents unnecessary legal hurdles, such as:
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Extensive property transfer documentation
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Gift deed execution
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Family settlement agreements
By selling the property first and then distributing the money as a gift, the process becomes much simpler.
Scenario 2: If Your Parents Are Indian Residents
If your parents are Indian residents, the process is even easier. They are only subject to a 1% TDS (Tax Deducted at Source) on the sale, whereas NRIs face a 20%+ TDS along with additional education cess charges.
If you, as an NRI, sell the property yourself, you might have to travel to India for 10–15 days and deal with higher tax deductions. Instead, let your resident parents sell the property and send the money to you as a gift. They can then file for a tax refund on the deducted TDS.
Example:
If the property is sold for ₹1 crore, a ₹20 lakh TDS may be deducted. However, by filing a tax return, parents can reclaim a portion of this amount, allowing them to send more funds to their children abroad.
Alternative Approach: Transferring the Property First
Some NRIs consider having their parents transfer the property to them before selling. While legally possible, this approach is often impractical due to additional steps:
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Gift Deed Registration: Requires physically signing and registering the deed in India.
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Property Title Transfer: The title must be legally transferred before selling.
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Buyer Concerns: Buyers may hesitate to purchase a recently transferred property due to title clearance issues.
Simply signing a gift deed doesn’t transfer ownership. The property must be legally registered in the new owner’s name before a sale, making the process more complex.
Selling a Jointly Owned Ancestral Property
If the property is co-owned with siblings or extended family, there are two possible scenarios:
1. Mutual Agreement: If all co-owners agree, they can appoint one person to sell the property and divide the proceeds afterward.
2. Disagreement: If no consensus is reached, the property must first be legally divided before each person can sell their share, making the process more time-consuming.
