Guide to Tax Implications for NRI Selling Property in India

It’s challenging to manage a house especially when you are not around. As an NRI, you may have been abroad for many years and you don’t want to sell the home that you’ve invested in India. While finding a buyer back home may seem like a daunting task, the greater challenge is to be on top of your tax-related matters. Tax and regulations relating to the selling of the property in India are different for NRIs as compared to that of an Indian resident. In such situations, the NRI property management service will help you. 

Who do you sell to?

First of all, NRIs cannot sell their agricultural land, plantations, or farmhouse to another NRI or any other person of Indian origin. However, residential or commercial property can be sold to another NRI or a person who is of Indian origin.

How much tax is payable?

Your NRI property consultant will tell you that NRIs need to pay taxes on capital gains made from selling house property. If they sell their property within 2 years of purchase then short-term capital gain tax will be applicable. Short-term capital gain tax will be applicable as per the taxable income in India. But if an NRI has inherited property then the cost and the date of its purchase of the previous owner becomes the basis for calculating this tax. 

Tax deduction for Indian residents selling property is 1% of its sale value. But for NRIs selling property within 2 years of the purchase period, the tax is 30% of the value. If the property is sold after 2 years then 20% is the value and there is a surcharge as well on education and health cess that varies depending upon the sale value of the property. If the sale value is above 50 lakhs and less than 1crore, then a 10% surcharge is applicable along with a 4% health and education cess. 

Applying for a certificate to reduce TDS 

If the TDS amount is more than your tax liability then you will get a tax refund after filing your taxes. However, if you want to avoid the refund process and contact your real estate consultant in Mumbai then you can apply for a certificate for deducting TDS at a lower rate with the judicial assessing offices of the income tax department. But note that before the application for this certificate is made you need to execute the sales agreement. Any advance or token money received before making such an application will continue to attract a higher TDS rate.

What about sales proceeds?

NRIs will receive the sales proceeds net of TDS. Ensure that you cross-check the TDS from a buyer with figures of tax credit received under form 26AS. The sales can only be received in an NRE/NRO bank account.

In Conclusion

Once you sell the property, you would need 2 certificates from a chartered accountant and form 15CB if the money has to be sent abroad. This is done to verify your money is from a legal source and all taxes have been paid.