NRI Taxation- Taxability of sale of property in India
Added: (Fri Feb 25 2022)
Pressbox (Press Release) -
NRI Tax Return
Like any Resident individuals, sale of property in India by NRIs are subject to capital gain tax on any appreciation made on such property. However, such capital gain tax may be avoided if such capital gain proceeds are invested in the manner prescribed under the Income Tax Act. Further, NRIs can also repatriate the sale proceeds of property outside India after payment of appropriate taxes and filing of form 15CA and 15CB.
Such sale of property and relevant capital gain tax on same need to be reported while filing NRI Tax return in India. Similarly, any income earned by NRIs by giving Indian property on rent would also be subject to tax in India after statutory deduction and such income will also form part of NRI Tax return in India.
It may be noted that all the transactions in India of NRIs relating to immovable property is governed by the guidelines issued under FEMA and RBI regulations.
Any person, not being Indian citizens and/or companies which are not incorporated in the country, are required to get prior permission of the RBI to acquire, hold, transfer or dispose of an immovable property in India.
TDS on Property
When a normal resident buys property from an NRI, she/he must have to deduct TDS at 20% if the property has been held for more than two years and at 30% if the property is being sold within two years. The deduction must include TDS plus surcharge, and education cess.
Documents required by NRI for selling property in India
1. Passport- It serves as a proof of identity for the person involved in the transaction
2. PAN Card- Some NRIs of select countries are to given PAN numbers which have their foreign residence address.
3. Tax Returns- If the NRI has been earning money from the property, tax returns for the ownership period should be kept.
4. Address Proof- Documents in support of address in India and abroad have to be provided like ration card, telephone bills, electricity bills, life insurance policy statements, aadhar card etc.
5. Sale Deed- Sale deed is a legally binding agreement between the buyer and seller.
6. Encumbrance Certificate- An encumbrance certificate is necessary to assure that the property has no dues to any legal authority.
The process of selling a property owned by an NRI in India is as follows:-
Hire a broker to conduct a comprehensive valuation of the property and determine its value.
Arrange all the necessary documents of the property.
The amount can be received only in a FCNR or NRE/NRO account
The NRI would be exempt from tax if he/she re-invests the capital gains of the property in another property or tax exempt bonds.
Capital gains are taxable in the year in which the property is transferred, irrespective of whether the sale payment has been received in full or not.
TDS is deducted at the time of making the payment to the NRI. All the information regarding the TDS and it’s rate have to be mentioned in the sale deed between the NRI seller and the buyer.
Any sale proceeds may be remitted outside India subject to payment of taxes in India and filing of form 15CA and 15CB.
Report the transaction relating to sale of property and capital gain or loss thereon while filing NRI Tax return in India.