NRIs selling real estate in India: Understand the repatriation rules

Sale of property by NRIs: Permissible scenarios

1. Selling property bought as a Resident Indian (RI)

• If you bought a property before you became an NRI, you can repatriate sales proceeds under the overall limit of USD 1 million per financial year (April–March). If you want to remit more than USD 1 million in a financial year, you should seek approval from the Reserve Bank of India (RBI) by applying through your authorised dealer (bank)

For instance, Sara, an NRI living in Canada, bought a house in Delhi, India, when she was an RI. Later, she sold the property for USD 2 million net of taxes. She can repatriate sale proceeds up to a limit of USD 1 million per financial year for all funds held in her Non-Resident Ordinary (NRO) account. This means that to repatriate USD 2 million, she will have to transfer funds from her NRO account over the course of at least two financial years. If she wishes to transfer the entire USD 2 million in the same financial year, she can do so by getting approval from the RBI.

2. Selling property bought as an NRI

For properties bought and sold after becoming an NRI, the repatriation limits depend on the source of funds used to purchase the property. If you have:

• Purchased the property with foreign currency or using your Non-Resident External (NRE)/Foreign Currency Non-Resident (FCNR (B)) accounts you can repatriate the entire sale proceeds of the immovable property. It is important to note that repatriation of sale proceeds for residential property (other than agricultural land) is restricted to a maximum of two such properties in your lifetime. If you want to remit proceeds by selling more than 2 properties, you should seek the RBI’s approval by applying through your authorised dealer (bank)
• Purchased the property using your NRO account or from Indian income, you can repatriate up to USD 1 million per financial year. This is applicable regardless of the number of properties sold. If you want to remit more than USD 1 million in a financial year, you should seek the RBI’s approval by applying through your authorised dealer (bank)

To understand this better, let's take the example of Pranav, an NRI, who bought five apartments in Mumbai, India, using the funds held in his NRE account. He subsequently decided to sell all the apartments. Since Pranav used non-resident funds held in his NRE account to purchase the property, he can freely repatriate the sale proceeds from two of the five properties sold. He cannot directly repatriate the sale proceeds from the remaining three properties. He will need RBI’s approval to do so.

Pranav’s brother, Vaibhav, another NRI, worked in India for several years before moving abroad. He used the Indian income deposited into his NRO account to purchase three properties in India. Vaibhav has now sold all three properties for USD 4 million net of taxes. Since he used his NRO account to purchase the properties, he can only repatriate up to USD 1 million each financial year. He can repatriate the balance amount from his NRO account over the next few financial years.