There might be a case where a different approach may be used to transfer or repatriate the Money arising from the sale of Property in India. Let us discuss the appropriate source through which Money can be repatriated or transferred abroad as there are various factors that must be taken into consideration from the Income Tax point of view as well.
Scenario 1:- Inward remittance Fund:-
This can be the source where there will be no restriction on transfer of the Fund if the Property was purchased by the NRI via Inward Remittance Fund. So accordingly, there is no need for RBI’s permission required neither there is limit neither Upper nor Lower.
It is to be noted that this is applicable to up to two residential properties and unlimited commercial properties. So From the third residential property onwards, NRI will have to deposit money into the NRO account. So accordingly up to a limit of 1 Million USD per financial year can be repatriated to the Home country without any permission and restriction of the RBI.
Moreover, NRI has to pay TDS that will be applicable to the profit earned by selling a property, and section 195 will be applicable as per relevant provisions. However, this TDS can be waived off if NRI makes the investment in another property within the prescribed period.
Scenario 2:- NRO Account Fund
If the property is purchased from the fund lying in the NRO account maintained in India then the repatriation of funds up to a limit of USD 1 million is allowed per financial year subject to the NRI having to deposit both principal and profit amount into the NRO account. And if we talk about Tax treatment under the Income Tax then it will be the same as scenario 1.
Scenario 3:- Inherited Property
If the property is inherited from the person resident in India then-No no restriction or permission is required from the RBI for repatriating the money abroad. This is not applicable where the property is inherited from the person Resident outside India.
NORMS to be Followed:-
- NRI must acquire the property in accordance with the FEMA regulations
- The repatriation amount must not exceed the Property purchased amount.
- And Maximum repatriation amount must not exceed 1 million USD per Financial Year
- This repatriation provision is applicable up to 2 Residential Property
- Evidence of Documentation is needed to prove the Acquisition or Inheritance as the case may be.
- CA Certificate and Bank account Statement is required
- NOC is required from the Income Tax Authority.
Procedure to be followed:-
Step 1:- Firstly, you will have to get CA Certificate that is called 15 CB. This form is the proof that you have acquired the property and accordingly, all the Dues of the tax has been paid accordingly complying with all the legal Formalities
Step 2:- Then File Form 15 CA by logging into the Income Tax site.
Step 3:- Then under the from 15 CA, provide the acknowledgment number of uploaded 15CB
Step 4:- After completing Form 15 CA and 15 CB then you will have to visit the bank and then the bank will assign you Form A2. In form A2 you will have to fill up the required details and attach the required documents such as sale document of property, Will, and death certificate.
After completion of all these procedures then you can easily transfer the fund abroad by NRI.
Tax Reduction On Property sale:-
We are here talking about reducing the tax burden by way of DTAA ie, the Double Taxation Avoidance Agreement then either you can get a low tax reduction or Exempt the income from the Tax so as to avoid the Doubly taxation. For this benefit, NRI has to produce the tax residency certification from the country of residence at signifying that you are a resident of a particular country and you have already paid tax in that country of Residence.
If your income is less the Basic exemption limit then by filing the Income-tax return in India NRI can claim deducted TDS
Or
Tax Exemption Certificate from the Income Tax Department under section 195 of the Income Tax Act, 1961 can be obtained if you wish to invest the sale amount
Tax exemption
There are 2 alternates that can opt to avail the tax exemption like if the NRI sells their property after three years of purchase and reinvest the sale proceeds into another residential property within two years of sale, gains will be exempt to the extent of the cost of a new property.
Another option can be invested in capital gain bonds, bonds may be of the National Highways Authority of India and Rural Electrification Corp, so investing in this Tax on the capital gain amount will be exempt but these bonds will be subject to lock for a period of 3 years.
There might be other amendments with respect to the relevant financial year that is relevant to the NRI. It is better to take a bit of advice from professional expertise to make a lucrative return and effective transfer.
Note:- NRI and PIO have the citizenship of foreign country so accordingly they can inherit or hold any property but the requirement is only that Transfer should be made under the under FEMA and RBI regulations.
Provisions related to NRI property
NRI must buy his property through the authorized channels Including the NRO, Non-Resident External (NRE), or Foreign Currency Non-Resident (FCNR) accounts.
It is to be noted that travelers’ cheques or foreign currency are not allowed to make payment for the purchase of property, so these unauthorized payments must not be taken into consideration.
As we discussed above the NRI selling property in India can legally repatriate money abroad. However certain specific provisions must be taken into consideration taking into effect all the legal considerations applicable to the Legally transfer of property.
Repatriation, as we clarified, in brief, the related provision wherein the NRI, can repatriate their money provided they must befall in the above-discussed scenario to take into the legal effect thereon.
As among them there were If the Property of Inherited acquired then there is no restriction of money arising from the sale of such Inherited property or Another one was if the property was purchased from the NRO account then on account of deposit the principal and profit amount, you will get a transfer or repatriate the sale amount of the property.
Last not least, there was also no restriction when the property is purchased from the Inward Remittance fund, then there will be also no restriction to repatriate or transfer the amount of sold property.
Moreover, the above-discussed provision is also that the Amount of repatriation cannot be exceeded the 1 million USD per financial year and for this, you will have to obtain a Certificate in form 15 CA from the Chartered Accountant along with this A tax clearance or NOC is required from Income Tax authority. A bank Account statement is also required to repatriate the money legally