An NRI can sell their home or business to an Indian citizen, another NRI, or someone of Indian descent (PIO). Another option is to mortgage the property to a financial organization that offers home loans or an authorized real estate broker. However, only a resident Indian citizen may purchase a property if it is an agricultural plot of land or farming development. You need to consult NRI tax consultant India for hassle-free work.
If the property were inherited from an Indian resident, the RBI would not need to give any special approval; however, if the NRI inherited the property from someone not of Indian descent, the Central Bank will need to grant authorization. Property transfers are taxed under the capital gains heading, and income from renting out a home is taxed under the “Income from House Property” heading. The difference between sales and indexed purchase costs determines the capital gain.
The following steps must be taken to sell an NRI’s property in India:
- Engage a brokerage firm to complete a thorough appraisal of the property and establish its value.
- Complete all the paperwork required for the property sale. If one is not physically present, one may appoint a trustworthy person with Power of Attorney (PoA) to handle the necessary duties.
- The following is a basic explanation of the taxing details:
- Short-term capital gains tax is due if the property is sold within two years of the purchase date (down from three years following Budget 2017), and long-term capital gains tax is due if the property is sold beyond two years.
- The tax rate on short-term capital gains is based on an individual’s income level.
- Long-term capital gains are subject to a constant 20% tax rate.
- The buyer of a property from an NRI resident of India must deduct TDS at a rate of 20% on long-term capital gains (LTCG). If the property is sold before two years have passed, 30% TDS will be subtracted, except at a lower rate if Lower Deduction Certificate is obtained by the seller. The buyer must get a TAN (Tax Deduction and Collection Amount Number) before deducting the TDS
- If a property has been inherited, the original owner’s acquisition date is considered when determining whether a capital gain is long-term or short-term. In this case, the property’s price would be determined by the sum that the previous owner paid for that item.
- TDS reduces the money paid to the NRI. All pertinent information concerning TDS and its rate must be included in the selling agreement between the NRI seller and the buyer.
- Only an NRO account may receive the funds.
- If the NRI reinvests the property’s capital gains in other real estate or tax-exempt bonds, they are not subject to tax, subject to certain conditions.
NRI documentation needed to sell a property in India:
Passport: It acts as an identification for the person conducting the transaction.
PAN Card: If one intends to apply for a tax exemption certificate following the sale of the property, one must have one. Several nations issue PAN numbers to NRIs that include the address of their overseas residence.
Tax Returns: If the NRI has been making money off the property, tax returns from the time they owned it should be readily available.
Address Proof: India and international addresses must be supported by documents. This category includes ration cards, phone and electricity bills, life insurance policy statements, aadhar cards, and other papers.
Sale Deed: A sale deed is an agreement that is enforceable in court between parties who are purchasing and selling. Society documents are required to verify that the vendor has made the necessary payments to the organization. An occupancy certificate certifies that the apartment has been occupied, and the allotment letter grants the property or apartment formal owner status.
Encumbrance Certificate: A encumbrance certificate is required to confirm that the property is free and clear of all debts to authorities.
The advice mentioned above and documentation work can be quickly done through the specialist of NRI tax planning in Pune for wase of pressure and other governmental laws.