Step1: Transfer Title of the Property In his Own Name
Once the property has been inherited in the name of NRI, the first thing that an NRI should do is to transfer the title of the property in his name. For this NRI would need a copy of the will and in case there isn’t one, then he will have to obtain a Succession Certificate from a local court.
Step 2: Take the Required Document
Following are the list of documents that NRI would require:
- Original Purchase Agreement, i.e. title document of the said property.
- No objection certificate (NOC), issued by the said previous owner of the property.
- Copy of approved plan and occupation certificate, which would be issued by the appropriate authority, Municipal Corporation of development.
- In case the seller does not possess the original documents stated above Lawyer certificate, then a certificate from his lawyer would be required to prove that he is the rightful owner would be required.
Step 3: Identifying the Preferred Sales Method
For NRI selling the property in India, the NRI may either hire an agent (Property Dealer) or he can do it himself. Although, the agent charges commission as a percentage of sales consideration it would be very helpful for the NRI since such agent may provide end-to-end solutions like the finding of the appropriate buyer, handling legal issues, due diligence, and the tax issues.
Step 4: Completing the Transaction
This is the last step of the completion of the transaction. This can be divided into the following further steps:
- Before selling the property, NRI should know the price of his property. In case you have hired a firm, they would provide him with the complete data to determine the price like the value of similar properties in the same locality. However, If he is transferring the property on his own, he would require similar data.
- It is very important to note that if the consideration is in cash, then the NRI should also take some legal advice since the transaction in cash may attract section 269T and 269SS of Income Tax Act, 1961.
- Issue an Admit Power of Attorney. A Power of attorney authorized a person to represent the NRI for the execution of the sale of the property.
- If the property is being sold after 2 years of holding it in his name, any gain arises on the sale of such property will attract the tax @ 20% as long term capital gain tax. Also, the buyer of the property is also required to deduct the TDS @ 20% on the sale consideration.
- If the NRI selling the property in India within 2 years of its purchase or inheritance then the gain arises on the sale of the property would be called short term capital gain and he shall be required to pay tax as per the normal slab rates.
- Although the NRI shall be eligible for the TDS waiver if he invests the amount of the gain in certain exemption scheme.
- Like if he invests in another residential property within 1 year before selling or 2 years after selling or constructs within 3 years of selling he shall be eligible for the exemption of capital gain amount as per section 54 of Income Tax Act 1961.
- Also, if NRI has invested in certain bonds within 6 months from the date of transfer of property then he shall be eligible for the exemption as per section 54EC of the Income Tax Act, 1961.