If you’re an NRI selling property in India, you need to be aware of the tax implications. NRIs who sell property in India have different tax rules than residents. Where TDS rate on Sale of property by Residents is 1% of sale transaction if the sale consideration is Rs.50 lakh or more, NRI are covered under the higher Tax Bracket.
Understanding Capital Gains
The tax rate depends on how long you’ve owned the property:
- If you’ve owned it for less than 2 years, it’s a Short-Term Capital Gain (STCG) taxed at your regular income tax rate.
- If you’ve owned it for over 2 years, it’s a Long-Term Capital Gain (LTCG) taxed at 20%, plus surcharge and cess.
TDS on Property Sales
Applicable TDS rates depending upon the value of transaction is as follows:
- If Sales Consideration less than Rs.50 Lakh- 20.8% (20%+4%)
- If Sales Consideration ranges from Rs. 50 Lakh -1 Crore – 22.8% (20%+10%+4%)
- If Sales Consideration is above 1 Crore – 23.92% (20%+15%+4%)
Want to reduce TDS?
Consider applying for a Lower Tax Exemption Certificate (Form 13) to reduce your tax liability. To do this, provide certain documents, including passport copies and TAN of the property buyer.
Strategies to Reduce Tax as NRIs
- Reinvest Capital Gain: Buy a new residential property in India within the specified timeframe or invest in capital gain bonds.
Exemption from LTCG on sale of residential house property
- Invest entire capital gain for purchase of new residential property 1 year before the sale or 2 years after the sale OR Construction of property that must be completed within 3 years of sale.
- Property should be located in India
- New property purchased could not be sold within 3 years of its purchase, otherwise exemption will be taken back.
- If capital gain cannot be invested up to 31st July, then it can be invested in PSU bank.
Exemption from LTCG on sale of property other than residential house property
- Net Consideration needs to be invested in the new property, where Net Consideration= Full Value of consideration- Expenditure.
- Invest gain for purchase of property 1 year before the sale or 2 years after the sale OR Construction of property that must be completed within 3 years of sale.
- Capital Gain Bonds: Invest your gains in bonds issued by NHAI or REC within 6 months of property sale. Investment should be made before the due date of ROI.
Note: 1st April 2023 onwards the exemption limit is capped at Rs. 10 Crore.
- Can I repatriate my property sale proceeds? The authorized dealer will allow the repatriation of sale proceeds outside India, provided the immovable property is other than agricultural land/ farm house/ plantation property in India and was acquired by the seller in accordance with the provisions of foreign exchange law applicable at the time of acquisition.
Documents required for Repatriation of funds
- Form A2
- Submit Form 15CA 15CB
(Procedure for repatriation of funds outside India has been discussed separately in our other blogs)
- Can I sell my property without being in India? Yes, NRI can do this by way of executing Power of Attorney (POA) in favour of person residing in India. Such POA must be legalized and apostilled in home country & thereafter it must be registered in the state in which the property in located.
For more details on the repatriation process and to understand the taxation aspects, contact us at email@example.com.