SALE OF NRI PROPERTIES IN INDIA
Numerous Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs)/Overseas Citizens of India (OCIs) residing abroad (USA, UK, Australia, Singapore) possess immovable property in India. NRIs/PIOs often acquire these properties through personal investments or inherit them from their parents or grandparents. Many NRIs/PIOs residing abroad express the desire to sell their properties in India and transfer the proceeds overseas. Some plan to sell Indian property to facilitate the purchase of property abroad.
The process of property sale raises various questions for NRIs and PIOs. Common inquiries that property sellers in this category may have include:
1. What is Capital Gain, and how is it calculated?
2. What is the Tax Deducted at Source (TDS) on the sale of immovable property, and how does it differ for NRIs/PIOs?
3. How can NRIs/OCIs obtain a Nil or lower Rate of TDS certificate (Form 13)?
4. What are the procedures for paying taxes and remitting funds abroad, including forms like 15CA and 15CB?
5. Should NRIs file Income Tax Returns (ITR) for property sale transactions?
6. Is it possible to save taxes on capital gains from property sales?
To address these concerns, here is some information clarifying the aforementioned doubts:
Capital Gain:
In simple terms, Capital Gain refers to the difference between the sale and purchase prices of a property. It can be a Capital Loss if the purchase price exceeds the sale price. Under the Income Tax Act, Capital Gains are categorized as Long Term Capital Gain (holding period over 2 years) and Short Term Capital Gain (holding period less than 2 years).
TDS on Sale of Immovable Property:
Indian Tax Laws require TDS deduction on property purchases to collect tax at the time of sale. TDS provisions differ for Resident Sellers (section 194IA) and Non-Resident Sellers (section 195, applicable to NRI/PIO). Section 195 imposes a maximum TDS rate of 20% on Long Term and 30% on Short Term, with additional surcharge and cess.
Lower TDS Certificate or TDS Exemption Certificate:
Section 195 allows for a maximum rate of tax deduction. To avoid inconvenience, NRIs/PIOs can apply for a Lower Rate TDS Certificate from the Income Tax Department to reduce the TDS rate. This is done under sections 195/197 of the Income Tax Act.
Filing of ITR for Capital Gain Reporting: NRIs/PIOs selling property must report the transaction to Indian Income Tax Authorities by filing an ITR after the close of the financial year. This allows them to claim excess TDS deducted as a refund.
Saving of Capital Gain Tax:
NRIs can save tax on capital gains through investments such as Tax Saving Bonds or in new residential houses in India.
Investing in the real estate market, especially in thriving cities, is a lucrative opportunity in India. Many non-resident Indians (NRIs) have ventured into the residential and commercial property sectors in India, whether for investment purposes or otherwise. However, for most NRIs, managing, selling, disposing of, or reinvesting these assets in India poses practical challenges. The sale of property by NRIs comes with a higher rate of tax deduction at source, tying up essential funds in India. The entire process of sale, reinvestment, and repatriation typically takes several months, considering the associated tax and regulatory requirements.
We offer a comprehensive suite of solutions for the sale of real estate in India by NRIs. From the planning phase before the property sale to the repatriation of proceeds, we guide our clients through the entire process, ensuring seamless tax return filing in both countries, along with any applicable Double Taxation Avoidance Agreement (DTAA) benefits.
Pre-Sale Assistance
1. Pre-sale Tax Planning:
We assist in understanding options such as reinvestment, repatriation, cash flows, and potential global tax mitigation strategies.
2. Connection to Empanelled Real Estate Consultants:
We link you with real estate consultants to aid in the sale process.
3. Obtaining a Lower Tax Deduction Certificate:
Subject to PAN jurisdiction, we help secure a certificate that limits tax deductions at source to the necessary amount for capital gains on the property.
During the Sale Assistance
1. Computation of Capital Gains:
Ensuring accurate reporting of capital gains for transparency.
2. Reinvestment Assistance:
Helping in reinvesting sale proceeds for optimal returns and exploring investment options.
3. CA Certification for Repatriation:
Facilitating smooth repatriation and fund remittance with CA certification.
4. Hand-holding During the Sale Process:
Assisting with questions, clarifications, and buyer’s tax issues during registration.
5. Expertise and Support:
Our experienced team provides guidance and assistance throughout the sale process.
Post-sale Assistance
1. Filing Income Tax Returns in India:
Handling the filing of income tax returns in India to ensure compliance with tax regulations.
2. Filing Tax Returns in Australia:
Assisting with tax return filings in Australia, addressing global tax obligations.
3. Repatriation of Funds:
Facilitating the transfer of funds from your Indian bank account to your Australian bank account, along with providing CA certificate 15 CA/CB for the banks.
4. Double Taxation Treaty Benefits:
Helping leverage the Double Taxation Treaty between India and Australia to minimize tax liabilities and avoid dual taxation.
5. Assistance with Income Tax Assessment Proceedings:
Providing support and guidance in income tax assessment proceedings to ensure a smooth resolution if such situations arise.”
