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The below content is purely for informational purposes and is not intended to constitute advisory of any kind. Please note, these are in-depth articles which are best viewed on large screen devices like laptops, desktops and tablets. The position reflected in this article has been updated as of April 15, 2024.

As a Non-Resident Indian (NRI)/Person of Indian Origin (PIO)/Overseas Citizen of India (OCI), you may sell any immovable property in India, including residential or commercial, to a person resident in India or another NRI/PIO/OCI. However, you must comply with the relevant Foreign Exchange Management Act (FEMA), 1999, regulations while repatriating the sale proceeds from India. Repatriation limits depend on your residential status, the method of acquiring the property and the source of funds. This guide outlines the permissible sale scenarios and the associated repatriation limits.

 

Repatriation of sale proceeds

If you intend to remit the sale proceeds of your Indian property, the rules for repatriation of funds will depend on factors including:

  • Whether the property was purchased, gifted or inherited
  • Source of funds used for acquiring the property
  • Your residential status at the time of the property’s sale and purchase

Further, in all the mentioned scenarios, the repatriated amount will be net of any Taxes Deducted at Source (TDS) by the buyer. Before remitting the sale proceeds, you must comply with Form 15CA filing requirements. To learn more about the taxation rules for the sale of immovable property, please click here.

 

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 is restricted to a maximum of two such properties. If you want to repatriate sales proceeds from more than two properties, you will have to transfer the funds to your NRO account. Subsequently, you can transfer the amount pertaining to additional properties under the overall limit of USD 1 million per financial year.
  • 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. Instead, he can transfer the amount to his NRO account and repatriate the balance amount subject to a USD 1 million limit per financial year for all the funds held in his NRO account.

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.

Did you know?

As an NRI, you can sell agricultural land, plantation property or a farmhouse in India to an RI but not to another NRI or OCI. Sales proceeds from such properties cannot be repatriated outside India.

3. Property received as a gift or inheritance:

You can repatriate sale proceeds up to USD 1 million per financial year, regardless of the property's origin or purchase details. Further, as an NRI, you may inherit agricultural land, plantation property or a farmhouse, but you cannot repatriate the sale proceeds from such properties outside India.

Let's look at the example, of Shlok, an NRI residing in the United Kingdom (UK), who inherits a house in India from his father Akash, an RI. If Shlok decides to sell the house, he can repatriate the sale proceeds up to USD 1 million per financial year, even if Akash had previously used non-resident funds to purchase the house. However, in case he wants to remit more than USD 1 million in a financial year, he must seek the RBI’s approval by applying through his authorised dealer (bank).

Conclusion

As an NRI, a smooth repatriation of sale proceeds from property in India requires a comprehensive understanding of its limits and regulations. These limits vary depending on your residential status, method of acquiring it, and source of funds. Further, such repatriation is net of taxes, which the buyer deducts. You must seek professional guidance from your bank and a tax expert to navigate the limits and taxation complexities.

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