NRI investment in real estate gets made possible when an NRI can sell his real estate to an Indian resident, another NRI, or a person of Indian descent (PIO). The Reserve Bank of India (RBI) has stated that NRIs do not need prior permission from the RBI to transfer immovable property. The sole requirement is the purchase price gets settled in Indian rupees through conventional banking channels or via NRI bank accounts following FEMA and RBI rules. Therefore, NRIs must follow the RBI rules and regulations.
You can also loan the property to a licensed real estate agent or a financial organization specializing in house loans. However, if the property is agricultural land or a farmland development, it can only be transferred to an Indian citizen who is a resident of the United States.
If the property got inherited from an Indian resident, no special authorization from the RBI is necessary; however, if the property was inherited from someone who was not of Indian ancestry, the NRI will need to request permission from the Central Bank.
NRIs can easily acquire or sell property in this country and repatriate sale profits. However, there exist some norms and regulations that must get observed. They get governed by the RBI. They are also subject to the FEMA. Under different topics, we will address the rules governing the acquisition and sale of real estate properties by NRI. Also, we will talk about the repatriation of sales proceeds.
Can NRIs sell property in India?
NRIs can transfer or sell commercial or residential properties in India that they have invested and bought or inherited to an Indian resident, PIO, or NRI. But, when selling agricultural lands, plantation properties, or farmhouses, it should get transferred to an Indian resident. Following the sale, the sale funds get repatriated to the nation of residency. And in this case, you must adhere to specific criteria established by the RBI under FEMA.
Repatriation of sale earnings property by NRIs when bought as a resident of India
When you sell a property purchased before migrating overseas, that is, when you were an Indian resident, the revenues must get deposited to your NRO account. If you have fulfilled all of your tax obligations, you can do maximum repatriation of USD 1 million, including extra capital transactions, every fiscal year (April-March). Repatriations get restricted to the sale of two residential homes. If you have held the properties for at least ten years, you are eligible for repatriation. You cannot instantly repatriate the money if you have owned the property for less than ten years. You must retain the money in the NRO account for at least 10 years before transferring it. For example, suppose you’re selling a home after owning it for eight years. The profits from the sale must then get held in an NRO account for two years. After two years, you are free to return home.
Repatriation of sale earnings of property bought as a non-resident of India by NRIs
The sale proceeds of the properties bought after becoming an NRI can be sent outside India only if the following requirements get met:
- The asset must get acquired under the applicable foreign exchange legislation at the acquisition time.
- The amount of repatriation cannot cross the foreign money amount transmitted to India by the NRI through conventional banking channels for properties acquisition.
- The remittance cannot exceed the amount paid for the properties through the FCNR or Foreign Currency Non-Resident Account.
- The amount repatriated cannot exceed the loan repayment amount made through foreign inbound remittance or debit to Non-Resident External (NRE) or FCNR accounts. The amount remitted cannot exceed the amount paid through the Non-Resident External account at the time of purchase.
- The number of sale profits must get deposited to an NRO account in all situations, and only a maximum of USD 1 million per fiscal year can be repatriated. But, two properties are only eligible for such repatriation. The ten-year waiting period for repatriation is not applicable to homes purchased by NRIs with their foreign money.
Repatriation of property inherited sale profits of NRI
NRIs or PIOs are permitted to repatriate the sale profits of properties inherited from a person residing in India. Provided they present documentary proof in favor of their inheritance. They are also required to show proof of their tax clearance certificates issued by the IT administration. The sum should not be more than $1 mill. every fiscal year.
Are NRI property sales subject to taxation?
Yes, there is a tax for NRI selling property in India. NRIs will incur long-term capital gains of 20% if the property gets sold past three years from the acquisition date. Gains get determined as the difference between the selling price and the indexed cost of buying.
The cost of buying adjusted for inflation is the indexed cost of purchase. In the event of inherited property, the price of buying and the date will represent the cost to the property owner and the date to compute the time of holding and purchase price. NRIs get required by law to pay a 20 percent TDS.
If they sell the home three years from the purchase date, they will be subject to a TDS of 30%, regardless of the tax bracket. Short-term capital gain gets measured as the difference between the sale price and the acquisition price. They are also not eligible for indexation.
Any exemption on tax from the sale of real estate by NRIs?
Without a doubt, NRIs get entitled to tax exemption in certain circumstances. If they sell their properties after three years plus reinvest the earnings in new residential properties within 2 years of the sale, the gains will be exempt up to the cost of the new property.
Another example of an exemption is the purchase of capital gain bonds. NRIs would get excluded from paying capital gains tax if they sell their property after 3 years and reinvest the profits in bonds issued by the National Highways Authority of India and the Rural Electrification Corporation of India within 6 months of the sale. The bonds will get locked in for a 3-year term.
This aims to show the correct procedures involved in the sale of properties by NRIs. It also applies to the repatriations of sales earnings. It is best to seek the advice of a specialist when delving into the finer points of these transactions kinds.
Required documents required for NRI to sell property in India?
A commonly asked question on Quora is, “What documentation do NRIs require when selling a property?” So we consulted our legal counsel and acquired a list of essential papers. The documentation necessary for an NRI to sell property is as follows:
- Passport: If an NRIs want to sell property in the nation, they should have passports. But, it does not have to be an Indian passport. It will serve as proof that the individual took part in the transactions. It also applies to OCIs and PIOs.
- PAN Card: Most NRIs will not have to pay taxes in their home country of India since their income gets taxed in the countries where they dwell. If they intend to buy real estate in the nation, NRIs must obtain a Permanent Account Number card. Following the sale of the property, an application for a tax deduction certificate gets required. PAN numbers get granted to NRIs who have an address in a foreign country.
- IT Returns: An NRI owns a property for a fixed time and earns money by leasing it. This money is subject to taxation. Property ownership IT results should get kept on hand.
- Address Verification: An NRI must give evidence to prove her Indian and foreign addresses. Ration cards, phone or power bills, and insurance statements are all examples. These are also essential for legitimate address authentication while traveling overseas.
- Sale Deeds: Crucial documents in the process is the sale deeds, which also serve as the primary evidence of ownership. It is a legally binding document that NRI signs while investing in or purchasing unfinished properties in the nation.
- Allotment Letter: Allotment letters must get provided by builders, organizations, or any other authority. As a result, it grants ownership to the named individual in the letter.
- Documents from Societies: Letters from Societies are necessary for a green flag to the procedure of sales for flats in a given location. According to this document, the NRI cannot have any pending loans. To verify ownership, copies of the society’s membership are also necessary.
- Occupation Certificate and Building Permit: Copies of any permitted building plans are necessary when selling a building. However, occupation certificates are also required to demonstrate that the structure has gotten inhabited. It must get approved by a building society.
- Certificate of Encumbrance: An encumbrance certificate is necessary to demonstrate no outstanding obligations on the properties. It is crucial when buying an apartment.
It would also be advantageous if an NRI could produce verification of property tax certificates. A careful buyer could ask for it.
However, if the originals of the documents are missing, the seller must seek the aid of a lawyer. He will issue a certificate demonstrating that the NRI is the legitimate owner. The lawyer will research the property and acquire a title report. When he is sure, he will publish a public announcement in an English/Hindi newspaper and a regional language and wait for the set time to see whether anybody claims ownership. When the lawyer gets persuaded, he will issue a certificate declaring that the seller is the legal owner.
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RBI Rules To Sell Property For NRI FAQ’S
No. The RBI has stated that NRIs do not need prior authorization to sell or transfer any property.
If you are an NRI, you are free to sell the property to a Resident Indian. If the buyer is an NRI or a POI, the RBI may need to approve the transaction. However, you are not permitted to sell the property to foreigners.
Yes. PIOs and NRIs can gift or sell any residential or commercial property they own in India to an Indian resident, NRI, or PIO. Foreign nationals of non-Indian origin must seek RBI authorization before selling property in India.