NRI Taxation- Taxability of sale of property in India
Like any Resident individuals, sale of property in India by NRIs are subject to capital gain tax on any appreciation made on such property. However, such capital gain tax may be avoided if such capital gain proceeds are invested in the manner prescribed under the Income Tax Act. Further, NRIs can also repatriate the sale proceeds of property outside India after payment of appropriate taxes and filing of form 15CA and 15CB.
Such sale of property and relevant capital
gain tax on same need to be reported while filing NRI Tax return in India. Similarly, any income earned by NRIs by giving
Indian property on rent would also be subject to tax in India after statutory
deduction and such income will also form part of NRI Tax return in India.
It
may be noted that all the transactions in India of NRIs relating to immovable
property is governed by the guidelines issued under FEMA and RBI regulations.
Any person, not being Indian
citizens and/or companies which are not incorporated in the country, are
required to get prior permission of the RBI to acquire, hold, transfer or dispose
of an immovable property in India.
TDS on Property
When a
normal resident buys property from an NRI, she/he must have to deduct TDS at
20% if the property has been held for more than two years and at 30% if the
property is being sold within two years. The deduction must include TDS plus
surcharge, and education cess.
Documents required by NRI for selling property in India
3. Tax Returns- If the NRI has been earning money from the property, tax returns for the ownership period should be kept.
4. Address Proof- Documents in support of address in India and abroad have to be provided like ration card, telephone bills, electricity bills, life insurance policy statements, aadhar card etc.
5. Sale Deed- Sale deed is a legally binding agreement between the buyer and seller.
The process of selling a property owned by an NRI in India is
as follows:-
Ø
Hire a broker to conduct a comprehensive valuation of the
property and determine its value.
Ø
Arrange all the necessary documents
of the property.
Ø
The amount can be received only in a FCNR or NRE/NRO account
Ø
The NRI would be exempt from tax if he/she re-invests the
capital gains of the property in another property or tax exempt bonds.
Ø
Capital gains are taxable in the year in which the property
is transferred, irrespective of whether the sale payment has been received in
full or not.
Ø
TDS is deducted at the time of making the payment to the NRI.
All the information regarding the TDS and it’s rate have to be mentioned in the
sale deed between the NRI seller and the buyer.
Ø
Any sale proceeds may be remitted outside India subject to
payment of taxes in India and filing of form
15CA and 15CB.
Ø
Report the transaction relating to sale of property and
capital gain or loss thereon while filing NRI
Tax return in India.
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