Selling Property in India: NRI's Must Remember These Things..!

 Mr. Vineet Agarwal, Director, KPMG

The real estate market in India is growing and NRIs (non-resident Indians) are playing a key role in it. Here, we look at basic rules &  regulations governing sale of property by NRIs in India.

Income Tax on Sale..!

Profits earned by selling property in India will be liable to capital gains tax under the IT (Income Tax) Act, 1961.

Capital gain is the difference between the sale value of the property &  its cost of purchase. Capital gains can be classified as short term {up to  3 years (36 months)} or long term {more than 3 years (36 months)}, depending on the period for which the property is held.

Mr. Vineet Agarwal, Director, KPMG

Short-term capital gain will be taxed at normal slab rates (10.3%, 10.6% and 30.9%) and long -term gain will be taxed at 20.6%, subject to certain conditions.

How to Reduce Income Tax Liability..!

Investing the sale proceeds in purchase / or construction of another house property:

If a residential property is sold after being held for more than three years (36 months) & the proceeds are reinvested for purchase of a new residential property, then the capital gains will be exempt to the extent of the amount reinvested.

The exemption is subject to the new property being purchased within a year (12 Month) before or two years  (24 month) from the date of sale, or /  if new property is being constructed within three years (36 month) from the date of sale.

Investment in Capital Gain Account Scheme..!

If an NRI was not able to make the necessary investments, the income tax act provides that the amount can be kept in a nationalised bank under the Capital Gain Account Scheme before the due date of filing income - tax returns to avail the tax exemption.

This amount is required to be utilised for purchase / or construction of new property within a specified period.

Sale Proceeds Invested in Bonds..!

NRIs can also claim exemption by investing the amount of capital gains in bonds issued by the NHAI (National Highways Authority of India) or / REC (Rural Electrification Corporation). Investment in the specified bonds is to be made within six (6) months of such sale and there is a lock-in period of three years (36 month) for such bonds.

Properties that Can Be Sold.!

An NRI can sell any immovable property in India other than agricultural land / plantation property / farm house to an NRI, a PIO (Person of Indian Origin) or a person resident in India under the FEMA provisions.

If an NRI has acquired an agricultural or / a plantation land or / a farm house by way of inheritance, it can be sold only to Indian citizens who qualify as residents of India.

Repatriation of Money..!

An NRI who has sold a house property can repatriate the sale proceeds up to $ 10 lakh per financial year, provided all the taxes have been paid &  a certificate to that effect has been obtained from a chartered accountant, subject to certain conditions.

( The author is a director in KPMG. The views expressed are personal.)

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