NRIs Selling Property in Kerala – All that you need to know

Selling property in India as a Non-Resident Indian (NRI) involves certain tax implications and repatriation considerations. Here’s a brief overview of the key aspects to consider:

  1. Tax Implications and TDS: When an NRI sells property in India, they are liable to pay taxes on any capital gains earned. The buyer is required to deduct Tax Deducted at Source (TDS) at the rate of 20% for long-term capital gains and 30% for short-term capital gains.
  1. Capital Gains and Property Value: Capital gains tax is calculated based on the difference between the property’s sale price and its indexed cost of acquisition. For long-term gains (property held for more than two years), indexation benefit is available to adjust the purchase price for inflation.
  1. Surcharge and Education Cess: Surcharge may apply on the capital gains tax, depending on the total income. Additionally, an education cess of 4% is applicable on the tax liability.
  1. Assessing Income Tax Liability: It is the responsibility of the NRI to compute their taxable income, calculate capital gains, and determine the applicable tax liability. This can be done by consulting a chartered accountant or tax advisor.
  1. Income Tax Returns: NRIs are required to file income tax returns if their total income in India exceeds the taxable threshold. Filing returns is essential to claim any tax refunds or exemptions.

Repatriation Implications:

 

  1. Property Purchased from Indian Source: NRIs can repatriate the sale proceeds from property purchased from an Indian source, subject to certain conditions and limits set by the Reserve Bank of India (RBI). The limit is currently set at $1 million per financial year.
  1. Property Purchased from Inward Remittance from Abroad: For property purchased using funds remitted from abroad, NRIs can repatriate the sale proceeds (including capital gains) without any restrictions, subject to taxes and documentation compliance.
  1. Form 15CA and 15CB: NRIs are required to file Form 15CA (undertaking) and obtain a certificate in Form 15CB (from a chartered accountant) for remittances exceeding specified limits. This ensures compliance with foreign exchange regulations.

Selling Inherited Property:

  1. Selling Inherited Agricultural Land:
  • NRIs are allowed to inherit agricultural land
  • NRIs are allowed to gift of agricultural land from relative.
  • NRIs are allowed to sell agricultural land.
  • Repatriation only as per LRS.
  1. Selling Inherited Property:
  • NRIs can sell and repatriate proceeds.
  • Specific TDS Provisions for NRIs will apply.
  • Repatriation under LRS scheme.
  • Inherited property can be gifted to family members.
  • Gift within family does not attract Income Tax.
  • Consult your CA before the deal.

Saving on Capital Gains Tax: NRIs can explore the following options to save on long-term capital gains tax:

 

– Reinvesting the capital gains in specified assets like residential property or capital gain bonds or specified bonds by government (Max.50 lakhs) within the specified time limits to claim exemptions.

– By reinvesting sale proceeds in another property.

– Utilizing the benefit of indexation to adjust the purchase price for inflation and reduce the taxable capital gains.

In summary, NRIs selling property in India need to be aware of tax implications, TDS, capital gains calculations, repatriation rules, and compliance requirements. Seeking professional advice is essential to navigate these aspects and optimize tax liabilities while ensuring compliance with relevant regulations.

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