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.
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:
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.
The article lists out the important points and steps an NRI property seller must keep in mind while selling property 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.
Three types of tax must be calculated whenever an NRI sells land in India:
We have covered TDS and Capital Gains in detail here: How should NRIs sell property in India?
If you are a resident Indian selling land in India, see this article instead: Complete Tax Guide for Resident Indians 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:
Capital Gains Tax when an NRI sells land in India depends on whether:
Note: NRIs cannot purchase agricultural land in India. They can either purchase it before becoming NRI, i.e. while they were resident Indians, or can inherit agricultural land even if they are NRIs. The selling of agricultural land by NRIs is allowed.
Urban agricultural land is situated close to a small population centre (shortest aerial distance and population as per the last census) as per the table below:
| Distance | Population |
|---|---|
| Less than 2 KM | More than 10,000 |
| More than 2 KM but Less than 6 KM | More than 1,00,000 |
| More than 6 KM but Less than 8 KM | More than 10,00,000 |
Any agricultural land which is not Urban agricultural land is classified as Rural agricultural land which is not a capital asset and therefore tax-free when sold.
Land records maintained by the municipality or equivalent body will give you the data for this distinction.
Once you know the type of land, the table below tells you what is the taxation applicable:
| Type | Urban Agri | Rural Agri | Non Agri |
|---|---|---|---|
| Capital Asset | Yes | No | Yes |
| LTCG Rate | 12.5% | No tax | 12.5% |
| STCG Rate | 30.0% | No tax | 30.0% |
Irrespective of the type of land you are selling, TDS will be applicable.
Effective TDS Rate = Base TDS Rate * (1 + Surcharge %) * (1 + Cess %)
where Base TDS Rate = 12.5% (long-term), Cess = 4%, Surcharge = 0, 10% or 15% (for property sold after 2 years of purchase)
and where Base TDS Rate = 30% (short-term), Cess = 4%, Surcharge = 0, 10% or 15% (for property sold before 2 years of purchase)
This effective TDS rate applies to the registration value of the land:
Warning: For NRI sellers, their PAN must be marked as NRI (to get around the Aadhaar-PAN linkage rule). Otherwise TDS will not get refunded even after Income tax return filing.
For deals after 23-Jul-2024 (as per Union Budget 2024)
Here are some sample TDS numbers for various sale values for deals after 23-July-2024 (using base TDS rate of 12.5% for properties held for more than 2 years)
| Registration value | TDS Rate | Buyer Pays to IT | Buyer Pays to Seller | Seller gets in NRO |
|---|---|---|---|---|
| ₹25 lakhs | 13.00% | ₹3.25 lakhs | ₹21.75 lakhs | ₹21.75 lakhs |
| ₹50 lakhs | 13.00% | ₹6.50 lakhs | ₹43.50 lakhs | ₹43.50 lakhs |
| ₹75 lakhs | 13.00% | ₹9.75 lakhs | ₹65.25 lakhs | ₹65.25 lakhs |
| ₹1 crore | 14.30% | ₹14.30 lakhs | ₹85.70 lakhs | ₹85.70 lakhs |
| ₹1.5 crores | 14.95% | ₹22.43 lakhs | ₹127.58 lakhs | ₹127.58 lakhs |
| ₹2 crores | 14.95% | ₹29.90 lakhs | ₹170.10 lakhs | ₹170.10 lakhs |
| ₹3.5 crores | 16.25% | ₹56.88 lakhs | ₹293.13 lakhs | ₹293.13 lakhs |
| ₹5 crores | 17.81% | ₹89.05 lakhs | ₹410.95 lakhs | ₹410.95 lakhs |
For deals before 23-Jul-2024
Here are some sample TDS numbers for various sale values for deals prior to 23-July-2024 (using base TDS rate of 20%)
| 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 |
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.
TDS rates are also revised to 12.5% (long-term) and 30% (short-term) with cess and applicable surcharge
Union Budget 2024 revised the long-term capital gains tax rules for land:
Proceeds from land 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
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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Published: 20 November 2024
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This post titled Complete Tax Guide for NRIs Selling Land in India first appeared on 04 Sep 2024 at https://arthgyaan.com
