May 30, 2025, Posted by Admin

Taxation & Repatriation Guide for NRIs Selling Property in India

Selling property in India can be a complex process for Non-Resident Indians (NRIs), especially due to the evolving tax laws and regulatory requirements. This article provides an overview of the key tax implications and procedural requirements NRIs must keep in mind when selling immovable property in India.

1. Understanding the Basics

What is Capital Gains?

Capital Gains refer to the profit earned from the transfer of a capital asset. Immovable property qualifies as a capital asset, and any profit on its sale is subject to Capital Gains Tax.

Classification of Capital Gains: Short-Term vs. Long-Term

• Long-Term Capital Gains (LTCG): If the property is held for more than two years before sale, the gains are treated as LTCG and taxed at a concessional rate.

• Short-Term Capital Gains (STCG): If sold within two years of acquisition, the gains are classified as STCG and taxed at applicable slab rates.

For inherited property, the original owner's date and cost of acquisition are used to determine the nature of the gain. If the property was acquired before April 1, 2001, the cost may be substituted with the fair market value as on that date i.e., 01/04/2001, as determined by a registered valuer. This can significantly impact the capital gains computation.

2. Rate of Taxation

Recent changes under Indian tax laws have introduced notable revisions for NRIs:

• LTCG Tax Rate: Effective July 23, 2024, the LTCG rate on the sale of immovable property has been reduced from 20% to 12.5%.

• STCG Tax Rate: STCG continues to be taxed as per the normal income tax slab rates applicable to NRIs.

• Removal of Indexation: From FY 2024–25 onwards, indexation benefits—earlier used to adjust the cost of acquisition for inflation—are no longer available for property sales.

Do DTAAs Provide Relief?

In most cases, no. Double Taxation Avoidance Agreements (DTAAs) between India and other countries generally state that capital gains from the sale of real property are taxable in the country where the property is located. Therefore, the sale of property in India by an NRI remains taxable in India, with limited or no DTAA relief available.

3. TDS on Sale of Property & Its Impact on Cash Flow

Higher TDS Rate for NRIs

Unlike resident sellers, where TDS is deducted at just 1%, NRIs face significantly higher TDS on property sales:

• For LTCG: 12.5% on the full sale consideration (plus surcharge and cess).

• For STCG: 30% on the full sale consideration (plus surcharge and cess).

Example: On a property sold for ₹60 lakhs, TDS can be as high as ₹8.58 lakhs (12.5% + 10% surcharge + 4% cess), which may exceed the actual tax liability.

TDS Compliance Requirements

• The buyer is responsible for deducting TDS and must obtain a TAN.

• TDS must be deposited by the 7th of the following month and reported via Form 27Q.

• Post-filing, the buyer must issue Form 16A to the NRI seller, confirming the TDS deduction.

Lower TDS Certificate: A Cash Flow Relief Option

In many cases, actual capital gains tax may be significantly lower than the TDS deducted. Example: If the actual capital gain on a ₹60 lakh property is ₹36 lakhs, and the tax liability is ₹5.14 lakhs, a TDS of ₹8.58 lakhs results in excess withholding of ₹3.44 lakhs. This amount is only recoverable via tax refund, which delays cash flow.

Solution: NRIs can apply to the Income Tax Department for a Lower/Nil TDS Certificate by submitting the estimated tax computation. Upon approval, the buyer will deduct tax at the lower prescribed rate.

4. Repatriation of Sale Proceeds

After the property sale, NRIs can repatriate the sale proceeds to their foreign bank account by submitting:

• Form 15CA: Filed online through the NRI’s income tax account.

• Form 15CB: A Chartered Accountant’s certificate confirming tax compliance.

These forms must be submitted to the authorized bank (dealer) before remitting funds abroad.

How We Can Help

At Jain Anurag & Associates, Chartered Accountants, we provide comprehensive end-to-end support to NRIs, including:

• Capital gains tax computation

• Application for lower TDS certificates

• Filing of tax returns and TDS compliance

• Assistance in the repatriation of sale proceeds

Connect with us today to ensure tax-efficient, compliant, and hassle-free property transactions in India.

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