How should NRIs sell property in India?
The article lists out the important points and steps an NRI property seller must keep in mind while selling property in India.
The article lists out the important points and steps an NRI property seller must keep in mind while selling property in India.
This article is a part of our detailed article series on property deals between an NRI seller and a resident Indian buyer. Ensure you have read the other parts here:
This article simplifies the process of selling land in India for NRIs, offering clear insights on how to manage TDS deductions, understand the differences between urban and rural agricultural land, and calculate capital gains tax.
The article lists out the important points and steps that a resident Indian buyer should keep in mind when purchasing property from an NRI seller.
This article lists out the processes and frequently asked questions for NRIs looking to create a Power of Attorney for selling their house in India.
This article lists out the processes and frequently asked questions for NRIs looking to fill Form 13 for applying for Lower Deduction Certificate.
We will cover the following points:
The best way to get your property sold is to hire the professional services of a property broker and offer them a slightly higher brokerage rate.
Some Dos and Don’ts on this:
These steps ensure the broker’s incentives align with yours to get the best rates.
Related:
FAQs for NRIs for applying for Power of Attorney (PoA) for selling a house in India
Three types of tax must be calculated whenever an NRI sells property in India:
Related:
Complete Tax Guide for NRIs Selling Land in India
Tax Deducted at Source (TDS) is the income tax deducted before the income is given to you.
All property deals by NRI sellers, without exception, fall under the TDS rules specified in Section 195 of the Income Tax Act. The TDS and payment rules are:
Related:
FAQs for NRIs for applying for Lower Deduction Certificate by filling Form 13
Effective TDS Rate = Base TDS Rate * (1 + Surcharge %) * (1 + Cess %)
where Base TDS Rate = 20%, Cess = 4%, Surcharge = 0, 10% or 15%
This effective TDS rate applies to the registration value of the property:
Here are some sample TDS numbers for various sale values.
Registration value | TDS Rate | Buyer Pays to IT | Buyer Pays to Seller | Seller gets in NRO |
---|---|---|---|---|
₹25 lakhs | 20.80% | ₹5.20 lakhs | ₹19.80 lakhs | ₹19.80 lakhs |
₹50 lakhs | 22.88% | ₹11.44 lakhs | ₹38.56 lakhs | ₹38.56 lakhs |
₹75 lakhs | 22.88% | ₹17.16 lakhs | ₹57.84 lakhs | ₹57.84 lakhs |
₹1 crore | 23.92% | ₹23.92 lakhs | ₹76.08 lakhs | ₹76.08 lakhs |
₹1.25 crores | 23.92% | ₹29.90 lakhs | ₹95.10 lakhs | ₹95.10 lakhs |
₹1.50 crores | 23.92% | ₹35.88 lakhs | ₹114.12 lakhs | ₹114.12 lakhs |
₹1.75 crores | 23.92% | ₹41.86 lakhs | ₹133.14 lakhs | ₹133.14 lakhs |
₹2 crores | 23.92% | ₹47.84 lakhs | ₹152.16 lakhs | ₹152.16 lakhs |
Note: If the buyer is applying for a home loan, the bank will not fund the TDS portion of the loan. That has to be a part of the buyer’s own funds. If the bank funds up to 75% of the non-TDS portion, the down-payment amount will be:
Registration value | TDS Rate | TDS Amount | Loan Eligible Amount | Maximum loan | Downpayment | Downpayment % |
---|---|---|---|---|---|---|
₹25 lakhs | 20.80% | ₹5.20 | ₹19.80 | ₹14.85 | ₹10.15 | 40.60% |
₹50 lakhs | 22.88% | ₹11.44 | ₹38.56 | ₹28.92 | ₹21.08 | 42.16% |
₹75 lakhs | 22.88% | ₹17.16 | ₹57.84 | ₹43.38 | ₹31.62 | 42.16% |
₹1 crore | 23.92% | ₹23.92 | ₹76.08 | ₹57.06 | ₹42.94 | 42.94% |
₹2 crores | 23.92% | ₹47.84 | ₹152.16 | ₹114.12 | ₹85.88 | 42.94% |
Many potential buyers might face challenges in arranging such a large down payment amount.
Short-term capital gains tax is 30% + cess for when sold within two years.
Long-term capital gains tax is 12.5% + cess for when sold after two years without indexation.
Union Budget 2024 revised the long-term capital gains tax rules for property:
Proceeds from property sale go into the NRO account. There is no role of the NRE account here.
You must engage a CA to repatriate this amount to your country of residence. You can transfer up to $1 million a year out of India as an NRI.
We have covered the complete process in detail here: The complete guide for transferring money to an NRE account
Sale proceeds in NRO account = Sale value - TDS
Post Tax income of the NRI = Total taxable income - Capital Gains Tax Due
If the total TDS (including income from share/MF sales, rent, NRO interest, etc.) plus the TDS from property sales is more than the tax due from all income, including capital gains on share sales, then there will be an income tax refund.
You must file your income tax returns by 31st July to get any refund.
Saving tax is only allowed in the case of Long-term Capital Gains.
There are only two ways to save Long-term Capital Gains tax from real estate sales:
Related:
How Section 54EC helps you save tax when you sell property
In either option above, you must open and deposit the amount to be utilised for either property purchase or bond investment in a Capital Gain Account Scheme (CGAS) if the investment happens after 31st July for a property transaction that happens before 1st April. For example:
Most countries (including India non-surprisingly) have tax on global income. As soon as the remittance from India hits your foreign account, the foreign bank will report the transaction, due to size, to the income tax authorities (e.g. the IRS for the US, HMRC for the UK etc.). You will have to pay capital gains (or equivalent tax) in your home country.
If the Double Taxation Avoidance Agreement (DTAA) is applicable, then any capital gains tax already paid (or to be paid in India) can be deducted from the tax due in your home country.
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This post titled How should NRIs sell property in India? first appeared on 04 Aug 2024 at https://arthgyaan.com