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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 January 15, 2024.

Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) frequently include real estate (or immovable property) as a part of their investment portfolio. That being so, there could be various reasons for which you may want to sell your immovable property.

Some of the points for you to consider for the sale of immovable property in India are:

 

Identification of the buyer and eligibility

Subject to the relevant Foreign Exchange Management Act, 1999, (FEMA) regulations, as an NRI or an OCI, you may sell any residential or commercial property in India to:

  • A person resident in India; or
  • Any NRI/OCI

 

You can also sell agricultural land, plantation property, or farmhouses in India to a resident Indian but not to another NRI or OCI.

An NRI or OCI who has acquired immovable property in India in accordance with the foreign exchange laws in force at that time can sell such property to an Indian resident, provided:

  • The transaction takes place through banking channels in India; and
  • an Indian resident is not otherwise prohibited from such acquisitions.

 

Repatriation of the sale proceeds

Broadly, the authorised dealer (bank) may allow repatriation of the sale proceeds (from the sale of property other than agricultural land, farmhouse and plantation property) outside India under the following conditions:

  • The property was acquired in accordance with the provisions of the foreign exchange law in force at the time of acquisition.
  • The payment for the acquisition of the property was paid in foreign exchange received through appropriate banking channels or out of the funds held in a Foreign Currency Non-Resident Bank (FCNR (B)) account or Non-Resident External (NRE) account.
  • Repatriation of sale proceeds for residential property is restricted to maximum of two such properties.

ICICI Bank customers can get in touch with their relationship manager for more details.

Depending on the circumstances prevailing at the time of sale of the property in India, you may also require approval from the Reserve Bank of India (RBI) for the repatriation of sale proceeds. Also, note that the authorised dealer (bank) may allow an NRI to remit up to USD 1 million per Financial Year (April-March). This amount is inclusive of:

  • The balances held in their Non-Resident Ordinary Account (NRO);
  • Sale proceeds of assets;
  • Assets acquired in India by way of inheritance.

In case you want to remit more than USD 1 million in a FY, you should seek approval from the RBI by applying through your authorised dealer (bank). The regulator grants approval on a case-to-case basis.

 

Tax considerations for NRI selling property in India

When selling immovable property, it is important to consider the capital gains tax. Capital gains tax will be long-term or short-term, depending on whether the immovable property is a long-term or short-term capital asset. If you have held the property for more than 24 months, it will be considered as a long-term capital asset. Otherwise, it will be considered as a short-term capital asset. If the property has been inherited/gifted (from close relatives*), then you also need to include the period of ownership of the previous owner. Long-term capital gains generally attract lower tax rates as compared to short-term capital gains.

In certain countries, sale of immovable property may be taxed at normal rates rather than the special rates applicable in India. Therefore, it is advisable to consult your tax advisor before undertaking an immovable property transaction in India.

*Close relatives such as brother (or stepbrother), daughter, son-in-law, father (or stepfather), mother (or stepmother), member of Hindu Undivided Family (HUF), sister, son (or stepson), daughter-in-law and spouse.

 

How to calculate capital gains tax?

The sale of immovable property is subject to capital gains tax in India. The capital gains are calculated by subtracting the following from the sale price:

  1. Cost of acquisition or in case the property is inherited/gifted, cost of acquisition to the previous owner.

  2. Cost of improvement undertaken by the seller or in case the property is inherited/gifted, cost of improvement undertaken by the previous owner.

    If the property was acquired or the cost of improvement was incurred before April 1, 2001, you have the option to use the ‘fair market value’ (the price that the capital asset would ordinarily fetch on sale in the open market on the relevant date or as determined by the registered property valuer) of the property as of April 1, 2001, or the actual cost of acquisition and improvement, whichever is higher. If this immovable property is a long-term capital asset, then such costs will be adjusted for inflation.

  3. Expenditures incurred for the sale/transfer of such immovable property.

Long-term capital gains can also be adjusted either by investing in another residential property in India within two years of the sale of the first property, or by investing the profits in an approved bonds or capital gains exemption scheme.

 

What is the applicable Tax Deducted at Source (TDS) on sale of immovable property?

Depending on the holding period of the property by the NRI, the TDS is to be withheld on entire sale consideration by the buyer (either resident or non-resident) as below:

 
Holding period of property <24 months >24 months

TDS on capital gains

30% plus applicable surcharge and education cess

20% plus applicable surcharge and education cess

Conclusion

Selling property in India as an NRI/OCI involves a thorough understanding of the process, relevant taxation treatment, and repatriation of the sale proceeds. By familiarising yourself with the process and seeking professional assistance, you can navigate the complexities involved in selling a property in India. 

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The contents of this article/infographic are meant solely for informational purposes. The contents are generic in nature and are not intended to serve as a substitute for specific advice on any matter whatsoever. The information is subject to updation, completion and verification and the applicable norms may keep changing materially from time to time. This information is also not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to applicable laws or would subject ICICI Bank Limited/its affiliates to any licensing or registration requirements. ICICI Bank Limited/its affiliates and their representatives shall not be liable for any direct or indirect losses or liability incurred arising in connection with any decision taken by any person on the basis of this content. Please conduct your own due diligence and consult your financial advisor before making any decision. Terms and conditions of ICICI Bank and third parties apply. ICICI Bank is not responsible for third party services. Nothing contained herein shall constitute or be deemed to constitute an advice, invitation or solicitation to avail any products/ services of third parties.