7 Things to Know Before Selling Your Property: A Content Idea for NRI’s Who Have Decided to Sell Their Property

If you don't live in India but are eager to sell your property there, are unaware of the process, or are perplexed by it. So you needn't be worried about it. You're reading the right article, after all. This article outlines the entire process of selling real estate in India by a non-resident Indian in a few easy steps.

Most often, non-Indian residents come to sell their property when the price of real estate in India increases, or it becomes more challenging for the NRI to manage their belongings in India.

Main Points Covered

1. What documents are needed in India by NRI to sell or transfer property?
2. Which kinds of property can an NRI sell or transfer?
3. How can NRI receive the Sale proceeds?
4. Residents of which country cannot sell or transfer property in India?
5. Can NRI sell Indian property to a Foreign national?
6. Is Filing of Income Tax Return in India, mandatory if an NRI sells the property?
7. What are the Repatriation limits for sale proceeds of Immovable property?

Many documents are required when selling a home, so it would be best for the NRI and the buyer if they made sure that everything was in order and filed appropriately.

Documents required by NRI for Property Sales include

● Passport: You should have a passport, albeit it requires an Indian passport if you wish to sell real estate in India. A passport will function as the transaction's participant's identity evidence.

● Pan Card: When an NRI plans to sell real estate in India, experts advise them to register for a PAN (Permanent Account Number) card here if they don't already have it. A tax exemption certificate will need to be requested as soon as the property is sold.

● Tax returns: A transaction becomes taxable if an NRI owns a property and generates income from it (by renting it out, for example). Tax returns should also be kept handy the entire time you own the property.

● Address Proof: An NRI must provide documentation to prove his Indian and international addresses. A ration card, phone or energy bills, or life insurance policy statements, may fall within this category.

● Sale deed: The sale deed is a crucial document required in the procedure and serves as the primary evidence of ownership. An NRI signs a sale deed, a legal document, when they buy a property in India.

● Allotment letter: A letter of allotment (from society, a builder, or any other pertinent entity) granting the property to the named owner.

● Records of the society: A letter from the society is required to approve the sale process for the apartment. According to this document, the seller has paid the society dues ( like maintenance expenses) in full. A copy of the society's membership is also necessary to prove property ownership.

● Approved building plan & occupation certificate: It's a Certificate stating that the building plan has been approved and the occupancy certificate has been issued. While a copy of an approved building plan is required when selling a property, the builder or the building society may also give an occupancy certificate as proof that the apartment has been occupied.

● Encumbrance certificate: It is required to guarantee the buyer that the land or property is free and clear of any outstanding debts to any governmental or financial body.

Under Reserve Bank of India (RBI) regulations, an NRI can sell a property they own in India. However, they are only permitted to sell homes and land to the following people:

● NRI's can sell residential properties to an Indian citizen or another NRI.

● Agricultural land, plantations, and farmhouses can be sold only to Indian citizens.

After selling the property, NRI can repatriate the proceeds overseas. However, the specifics will depend on the sale consideration received and how they originally bought the property. Later, we'll go into greater detail about this.

NRIs are prohibited from purchasing or owning farms, plantations, or other agricultural property.

Exception

If you were an Indian resident when you bought the property or inherited it from a relative, you might be able to own this kind of real estate as an NRI. However, NRI's can only sell agricultural land to an Indian Citizen.

An NRI trying to sell an inherited property in India is permitted to do so in the same manner as any other NRI. However, there may be further restrictions on the repatriation of funds.

You won't be permitted to take the proceeds from selling an inherited property outside of India without RBI clearance, according to FEMA Section 6(5). Consult a specialist if this is your situation.

3. How can NRI receive the Sale proceeds?

The amount of sale earnings must always be credited to the NRO account.

Only when several requirements have been satisfied will you be eligible to send the sale revenues of the property you sold outside India. These are the conditions:

● Sale proceeds of Farmland, farmhouses and plantations are not eligible to be repatriated outside India.

● The purchase procedure of the property sold should have complied with the FEMA regulations and applicable foreign exchange laws at the time of the property purchase.

● The maximum amount that the NRI can repatriate outside India is the amount paid by him to purchase the property mentioned above through official banking channels or out of money held in a Foreign Currency Non-Resident (FCNR) account. Thus the repatriation amount cannot exceed the relevant purchase amount which NRI had remitted from overseas.

● The remittance amount cannot be more than what was paid for the purchase using an NRE account.

● The repatriation of sale earnings for residential property is limited to a maximum of two such properties.

● The amount of sale earnings must always be credited to the NRO account, and the NRI cannot repatriate more than one million USD per fiscal year. Unlike an NRE account, an NRO account is distinct from one.

● Repatriation is always contingent upon completing the documentation requirements set forth by the RBI and paying any tax obligations stipulated by the Central Board of Direct Taxes(CBDT).

4. Residents of which country cannot sell or transfer property in India?

Without the Reserve Bank's prior approval, no citizen of Bangladesh, Pakistan, Sri Lanka, China, Afghanistan, Iran, Bhutan, or Nepal may purchase or transfer real estate in India, except for a five-year lease.

5. Can NRI sell Indian property to a Foreign national?

1. It is illegal for foreigners with non-Indian heritage to own property in India unless they receive it from a family who used to live there. However, they can purchase or transfer immovable property on a lease for five years without the Reserve Bank's prior approval in India.

2. According to the Foreign Exchange Management Act, 1999, Section 2(v), foreign nationals of non-Indian origin who are not citizens of Bangladesh, Pakistan, Sri Lanka, China, Afghanistan, Iran, Bhutan, or Nepal, may purchase the immovable property after moving in India. In this regard, they must meet the requirement for the length of stay. Therefore, the type of visa issued should expressly state the applicant's desire to remain in India indefinitely to establish his residence status for purposes of section 2(v) of the FEMA of 1999. (Annexed as Annex-1 is a press release from the Indian government dated February 1, 2009).

3. Foreign nationals of non-Indian descent who either inherited immovable property with the specific approval of the Reserve Bank of India or bought the immovable property with the explicit permission of the Reserve Bank are not permitted to transfer such property without the Reserve Bank's prior consent.

6. Is RBI permission in India required by NRI to sell a property?

An NRI can sell real estate in India without the RBI's approval. If you're a PIO, you can sell to an Indian citizen or an NRI without getting RBI approval, but if you want to sell to another PIO, you'll need to obtain RBI approval.

6. Is Filing of Income Tax Return in India, mandatory if an NRI sells the property?

NRI must file Tax Returns when they sell immovable property in India. Instead, this provision is in the interest of the NRI. We will explain this.

On property sale, the buyer has to deduct TDS @ 20% from the sale proceeds of the property and remit it to the Income Tax Department under the PAN of the seller. However, this rate is too high considering the value of property sales proceeds usually run in millions.

The NRI can take a refund of this amount by filing his Tax Returns timely.

The refund needs to be calculated by a Tax Expert who can also guide NRIs to claim the maximum possible refunds if they do reinvestments as per the provisions of Sections 54, 54F, and 54EC of the Income Tax Act 1961

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7. What are the Repatriation limits for sale proceeds of Immovable property?

Repatriation Limits depend on the way the concerned property was purchased or acquired.

(A) Immovable property is purchased through an agreement to purchase

(b) The Authorized Dealer may allow the repatriation of sale proceeds outside of India in the case of the immovable property sale other than a farmhouse, agricultural land, or plantation property in India by NRI, provided the below conditions are satisfied:

(I) The purchase procedure of the property sold should have complied with the FEMA regulations and applicable foreign exchange laws at the time of the property purchase.

(ii) The permissible repatriation amount cannot exceed the following amounts

● The amount of foreign currency acquired through regular banking methods that the NRI used to purchase the immovable property;

● The amount transferred from a non-resident foreign account;

● or the foreign currency value of the immovable property's acquisition price.

(iii) There is a cap of two residential properties for which NRI can repatriate the sale proceeds.

Exception

(b) A person included in the Foreign Exchange Management Act's Section 6's subsection (5) or his successor is not permitted to repatriate outside of India the proceeds from the sale of any movable property mentioned in that subsection without the Reserve Bank's prior approval.

(B) NRI purchased the immovable property with rupee cash or acquired it through inheritance.

An NRI or PIO can transfer up to $1,000,000 from their NRO account balances, the amount obtained through sales of the inherited or left-over property in India. The presenting of documentary proof to justify the remitter's acquisition, legacy, or inheritance of goods is necessary, along with a tax clearance certificate or a letter of no objection from the Income Tax Authority for the remittance. Remittances over US$ 1,000,000 in any fiscal year require prior Reserve Bank approval.

In circumstances where the settlement was made by one of the settler's close relatives or parents, the original deed of settlement and a tax clearance/no objection certificate from the Income-Tax Authority should be given for the remittance (according to Section 6 of the 1956 Companies Act).

In Nutshell

1. NRI's can sell residential property in India to Indian citizens or another NRI
2. NRI's cannot sell farmland, plantations, or farmhouses to another NRI.
3. NRI can sell farmland, plantations, or farmhouses to Indian citizens.
4. Permissible repatriation of sales proceeds cannot exceed USD 10,00,000 per fiscal year in any case subject to other limits.
5. Proceeds from sales of farmland, plantations, or farmhouses cannot be remitted outside India.
6. NRI can repatriate sales proceeds of a maximum of two residential properties outside India.
7. Tax Filing is mandatory when NRI sells the property.
8. 15 CA and 15 CB ( certificate from Chartered Accountant) need to be obtained for remittance