​Property  purchase & selling by NRIs & repatriation of sale proceeds
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• Anything you need to know about the NRI Guidelines for Buying and Selling Property and Repatriating the money
• For non-resident Indians, buying or selling immovable property in India and remitting sales proceeds is not that difficult, but there are certain rules and regulations to be followed during such transactions. They are regulated by the Reserve Bank of India and come under the purview of the Foreign Exchange Management Act (FEMA). In this article, under separate headings, we will cover the laws about the purchase and selling of property by NRIs and repatriation of sale proceeds respectively.
• Purchase of Property by NRIs
• An NRI or Person of Indian Origin (PIO) is legally entitled without prior permission from RBI to purchase residential and commercial property in India and there is no limit on the number of immovable properties that they may purchase. The only stipulation is that under FEMA and RBI regulations, the purchase sum must be paid in Indian Rupees through usual banking channels, or through NRI bank accounts.
• NRIs and PIOs may also legally inherit property and keep it from a person residing in India. They can not buy land for cultivation, land for planting or farming. They can, however, inherit and hold such property from a person residing in India.
• Property Selling by NRIs
• An NRI can sell their Indian residential or commercial property that they have purchased or inherited from an Indian citizen, NRI, or PIO. However the property must be sold to a person who is resident in India in the event of a sale of agricultural land, plantation property or farm house. The repatriation of sales proceeds to the country of residence comes after the sale. And you have to follow those guidelines laid down under FEMA by RBI here.
• Repatriation of the property sales proceeds by NRIs, purchased as a citizen of India
• If you sell the property purchased when you were a resident of India before moving abroad, then the NRO account must be credited with the selling proceeds. You are entitled to repatriate up to USD 1 million per financial year (April-March), plus all other capital transactions, provided that you have paid all your tax dues. Repatriation is limited to the selling of only two residential buildings.
• This repatriation will be achieved if you have owned the property for at least 10 years. You cannot repatriate the money automatically if you have held the property for less than 10 years. You need to keep the cash in your NRO account until the 10 year term ends and then you can move it.
• You sell a house, for instance, after holding it for 8 years. You then need to retain the sales proceeds for 2 years in the NRO account. You will repatriate yourself after this 2 year period.
• Repatriation of the property's selling proceeds by NRIs purchased as a non-resident of India
• Only after certain conditions are met will the selling proceeds of the property purchased after you become an NRI be remitted outside India:
• The property must be bought in accordance with the rules of foreign exchange prevailing at the time of purchase.
• The repatriation does not exceed the amount of the foreign exchange transferred by the NRI to India for the purchase of the said property through the usual banking channels.
• The remittance does not surpass the funds charged for the purchase of the property through the Foreign Currency Non Resident (FCNR) Account.
• Repatriation does not surpass the amount of repayment of the loan made using the Non Resident External (NRE) or FCNR accounts' foreign inward remittance or debit.
• The remittance does not surpass, at the time of purchase, the amount charged through the NRE account.
• In all cases, the amount of proceeds from the sale must be credited to the NRO account and can only be repatriated for up to USD 1 million per financial year. For only two properties, such repatriation is permitted.
• Waiting for 10 years to complete repatriation does not apply for purchased properties to purchase NRIs from their foreign cash.
• Repatriation by NRIs of the selling of inherited property proceeds
• The selling proceeds of immovable property inherited from an individual living in India can be repatriated by NRIs or PIOs as they produce documentary evidence in support of their inheritance and the requisite tax clearance certificates from the Income-Tax Authority. Per financial year the sum does not exceed USD 1 million.
• Taxation on land transactions by NRIs
• If the NRIs sell the property after three years from the date of acquisition, 20% of long-term capital gains will be incurred. The profits are calculated as the difference between the indexed purchasing cost and the value of the transaction.
• The indexed purchasing cost is the inflation-adjusted purchase cost. In the case of inherited land, the date and cost of acquisition shall be considered to be the date and cost to the original owner for the purpose of determining the retention period and the cost of purchase. NRIs are subject to a TDS of 20%, according to legislation.
• If the property is sold within three years of the date of acquisition, they are eligible for a 30 percent TDS short-term capital gain, irrespective of the tax slab. Short-term capital gains are calculated as the difference between the value of the sale and the purchasing cost. No income from indexation is applicable to short-term capital gains.
• Tax Exemption on the sale by NRIs of Land
• In some cases, NRIs are definitely eligible for a tax exemption. If after three years of purchase, they sell their property and reinvest the sales proceeds in another residential property within two years of sale, the proceeds will be exempted to the extent of the expense of the new property.
• Investment in capital gain bonds is another instance of an exception. If after three years of acquisition and reinvestment of the proceeds in bonds of the National Highways Authority of India and Rural Electrification Corp. of India, NRIs sell their property within six months of sale, they will be exempted from paying tax on capital gains. The bonds are going to be locked in for a three year duration.
• The details alluded to above are meant to demonstrate the due process involved in the acquisition and selling of property by NRIs and the repatriation of the proceeds from the sale. To look at more detailed descriptions of such transactions, it is advisable to consult a specialist.
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