Stories
NRI Property Sale in India: Navigate Capital Gains Tax, TDS, and Repatriation
- •Selling property in India as an NRI involves navigating capital gains tax, TDS, documentation, and repatriation rules, which should be planned before finalizing the sale agreement.
- •Tax treatment depends on the holding period: short-term gains (property held ≤ 24 months) are taxed at slab rates, while long-term gains (property held > 24 months) are generally taxed at 12.5% without indexation for NRIs.
- •TDS is deducted on the total sale consideration, not just capital gains, potentially leading to higher upfront deductions than the final tax liability; NRIs can claim refunds or seek lower deduction certificates.
- •NRIs can claim tax exemptions under Sections 54, 54F, and 54EC by reinvesting capital gains or net sale consideration in residential property or specified bonds, subject to conditions and caps.
- •Repatriation of sale proceeds is subject to FEMA regulations, allowing up to USD 1 million per financial year from NRO balances, with rules varying based on property acquisition and requiring proper tax documentation like Forms 145 and 146.
Key Questions Answered
The tax treatment depends on the holding period. A property held for 24 months or less is treated as a short-term capital asset and taxed at the NRI's applicable slab rate, while a property held for more than 24 months is taxed as long-term capital gain at 12.5% without indexation.
The buyer is responsible for deducting TDS on the total sale consideration rather than just on the capital gain, which can result in a significantly higher withheld amount than the seller's final tax liability.
Section 54 allows residential house sellers to reinvest capital gains into another residential house up to a ₹10 crore cap, whereas Section 54F applies to long-term assets other than residential houses by reinvesting net sale consideration into a residential house.
