If you are a Non-Resident Indian and having a property in India and wants to sell it but confuse about the procedure, then you are at the correct place. In this article, I’ll explain the whole procedure about the selling of property by the Non- resident Indian in India in simple steps.
Mostly a Non-Indian resident came for selling their property in India when there is
- hike in the price of the property in India or
- Becomes difficult for the NRI to manage the property
Now we will discuss the steps that an NRI has to take for selling its property in India:
- Rate of the Property: If you are planning for selling the property then the most important thing that you should know, is the price of your property. Since you are a Non-Indian Resident, hence this information can be known through property dealer in your areas. He should already know what are the benefits or disadvantages of the property.
- Engaging an Agent: As we already discussed above that the NRI should take the help of a property dealer by appointing an agent. Although it is not compulsory for NRI that he cannot sell the property without any real estate agent but it would be a benefit for NRI as it gives assistance for them who does not know about the property or the buyer nearby.
- Marketing of your Property: For selling the property it would be necessary for the NRI to market the property. For this, he may use a social network or advertisement banner at the house or telling his friends or relatives to help him for selling the house.
- Documents Filing: Since the Selling of property involves a lot of documents, hence it would be better for the NRI and buyer that they should ensure all the paperwork and document filing inappropriate manner. For Example Sale deed, NOC Certificate, Letter of allotment, undivided share of the land (UDS), etc.
- Take Legal Advice: For NRI there are so many compliances that he has to follow for selling the property in India.
For Example:
- If the NRI is selling the property which has been inherited him from any person who is a resident in India then after satisfying certain conditions, he can repatriate the funds without the permission of the reserve bank of India. However where the property is inherited to him from the person who is not an Indian resident then such NRI would require to take the permission of the central bank before repatriating the funds of selling of property outside India.
- Similarly, legal compliances like the determination of the rate and amount at which TDS should be deducted, Depositing of TDS return, Calculating the correct amount of capital gain, Availing in the scheme u/s 54 or 54F or 54EC.
Hence, it is advisable that the parties should take the advice of a Chartered Accountant to be clear about their tax structure.
6. Ending the deal: Normally an NRI can have 2 bank accounts which are
- Non-Resident External Account (NRE Account)
- Non-Resident Ordinary Account(NRO Account)
If NRI has any income which is generated in India, then he should deposit it in the NRO Account. Hence, the consideration received from the sale of such property shall be required to be deposited in an NRO account by the NRI.
Till now we have discussed the general compliances about the things that the NRI should be taken care of. Now, let us discuss the tax compliances that an NRI should know before selling the property.
If the property is being sold within 2 years of its purchase by the NRI then any gain from such property would be called short term capital gain and if the property was sold out after 2 years of purchasing it then it would be long term capital gain.
If the property is inherited to NRI then also it would be considered as long term capital gain
In the case of Long term capital gain, NRI shall be required to pay tax @ 20% on such gain and the buyer is also required to deduct the TDS @ 20% on the selling price U/s 194IA.
In the case of Short term capital gain, NRI shall be required to pay tax as per the normal slab rates of the Income Tax Act, 1961.
The capital gain shall be calculated in the following manner
| Particulars | Amount | |
| The full value of sale consideration | xxx | |
| Less: | Expenses incurred in connection with the sale | xxx |
| Net Consideration | xxx | |
| Less: | Cost of Acquisition | xxx |
| Less: | Cost of Improvement | xxx |
| Capital Gain | xxx |
If the capital gain is long term capital gain then the cost of acquisition shall be taken after indexation.
Exemptions available to NRI
The tax on capital gain earned by the NRI on selling the property can be reduced to nil if he has invested in the schemes as specified in section 54 and 54EC. Although these sections are very broad so I’ll explain it only in respect of NRI.
Section 54 of Income Tax Act, 1961: Capital gain on sale of Residential house
Assesse: Person should be individual or HUF
Conditions:
There should be the transfer (Sale) of residential house property which should be held for more than 2 years i.e. such residential property should be the long term capital asset.
New Asset:
Non- resident individuals can avail of the exemption by purchasing only one residential house property. Although, if 2 adjacent houses converted into single houses then it shall also be eligible for exemption.
Amount of Exemption:
NRI shall be eligible for the exemption of lower of
A capital gain arises from the sale of an asset
Or
Cost of new Asset
The time period for acquiring new assets
It should be purchased within 1 year before the transfer or 2 years after the transfer
Or
It should be constructed within 3 years from the date of transfer.
Restriction on transfer of new assets
New assets acquired shall not be transferred within 3 years from the date of purchase or the date of construction as the case may be.
The consequence of the violence of the above conditions
If the NRI violates any condition of section 54 after claiming the exemption then as and when the new asset would be sold then the cost of acquisition of new asset transferred shall be reduced by the capital gain exempted earlier for the purpose of computation of capital gain of new assets.
Section 54EC of Income Tax Act, 1961: Investment in Certain Bonds
Assesse: Person may be the any assesse
Conditions: There is a sale of any long term capital asset being land and building or both.
New Asset:
The gain from the transfer shall be exempted when such amount has been invested within 6 months of such transfer, in any of the following bonds:
- National Highway Authority of India or
- Rural Electrification Corp. Ltd. or
- Power finance corporation limited or
- Indian railway finance corporation limited
Note: the exemption shall be valid only if these bonds would be redeemable after 5 years from the date of issue.
Note: The maximum amount of exemption Rs.50 Lakhs.
Form to be filled for Less /NIL TDS certificate for Applying to the Judicial Assessing Officer of the jurisdiction?
Form to be filled for Less /NIL TDS certificate