A Complete Guide for NRIs: How to Sell Property in India and Save on Taxes

Are you a Non-Resident Indian (NRI) thinking about selling your property in India? Wondering how to navigate legal, tax, and repatriation regulations? Don’t worry — while the process does involve a few extra steps compared to resident Indians, it’s completely manageable with the right information.

This detailed guide breaks down everything NRIs need to know before selling real estate in India — from legal eligibility and documentation to taxation, capital gains exemptions, and fund repatriation.

What Types of Property Can NRIs Sell in India?

NRIs can legally sell:

• Residential property
• Commercial property

These properties can be sold to:

• Resident Indians
• Other NRIs or PIOs (Persons of Indian Origin)

Note: NRIs are not allowed to invest in or sell agricultural land, farmhouses, or plantation properties unless inherited. Such properties can only be sold to resident Indians.

Restrictions on Selling Inherited Property

If you’ve inherited property in India, the sale is generally permitted. However, there are regulations for repatriating the proceeds, especially if the property was inherited from a non-Indian origin individual.

As per FEMA (Foreign Exchange Management Act) Section 6(5), sale proceeds from inherited property cannot be sent out of India without RBI approval. It’s wise to consult with a legal or financial advisor to ensure compliance.

How Can NRIs Sell Property Without Visiting India?

You can sell your property either:

• In-person during a visit to India, or
• Remotely by appointing a trusted person in India as a Power of Attorney (POA).

How to Appoint a POA from Abroad:

1. Choose a trusted relative or friend.
2. Draft the POA and get it notarized.
3. Attest the POA at the Indian Embassy/Consulate in your country.
4. Send it to India for registration.
5. Register the POA within 3 months at a local sub-registrar’s office.

TDS on Sale of Property by NRIs (Tax Deducted at Source)

When you sell property in India, the buyer is obligated to deduct TDS before paying you the final amount.

TDS Rates for NRIs:

Additional surcharge for FY 2018–19 onwards:

• Above ₹2 crore: 25%
• Above ₹5 crore: 37%

Steps to Deduct and Deposit TDS:

1. Buyer obtains a TAN (Tax Deduction Account Number)
2. Deposits TDS to the Indian Income Tax Department via e-pay within 7 days of the next month.
3. Files Form 27Q (quarterly TDS return).
4. Receives Form 16A (TDS Certificate).
5. Provides Form 16A to you — required for refund or repatriation.

Capital Gains Tax for NRIs

Capital Gains Tax depends on the holding period:

• Short-Term Capital Gains (STCG): Property held < 2 years
  ➤ Taxed at applicable income tax slab.
• Long-Term Capital Gains (LTCG): Property held ≥ 2 years
  ➤ Taxed at 12.5% without indexation.

Inherited Property?
Date and cost of purchase by the original owner is considered for calculating capital gains.

How to Save Capital Gains Tax: Sections 54, 54F, and 54EC

Section 54 – For Sale of Residential Property

• Reinvest capital gains in another residential property.
• Buy within 1 year before or 2 years after the sale OR construct within 3 years.
• Exemption applies only in India, and for one house only.

Section 54F – For Any Asset Other Than Residential Property

• Use full sale proceeds to buy a residential property in India.
• You must not own more than one other house at the time of reinvestment.
• Full or proportionate exemption available.

Section 54EC – Invest in Government Bonds

• Invest in NHAI, REC, PFC, or IRFC bonds.
• Maximum investment: ₹50 lakhs per financial year.
• Bonds have a 5-year lock-in.

Tax Implications in the Country of Residence (e.g., USA)

India has a Double Taxation Avoidance Agreement (DTAA) with several countries including the United States. This means:

• You’ll only pay taxes in India, and
• Report the sale and repatriation to the IRS if applicable.

Important IRS Forms for NRIs in the USA:

• FBAR: Required if foreign bank balance exceeds $10,000.
• Form 3520: If repatriating funds exceeding a certain threshold.

Repatriating Sale Proceeds Abroad

You can repatriate up to $1 million/year outside India if:

• The property was purchased following FEMA guidelines.
• Funds came through proper banking channels or NRE/FCNR accounts.

Required Forms:

• Form 15CA: Filled by you.
• Form 15CB: Certified by a Chartered Accountant.

Documents Required to Sell Property in India (NRI Checklist)

1. Passport / OCI Card (ID proof)
2. Indian & overseas address proof
3. PAN Card
4. NRO Bank Account
5. Title Deed & Sale Agreement
6. Encumbrance Certificate
7. Tax payment receipts
8. Passport-size photos
9. Loan closure certificate (if any)
10. Power of Attorney (if selling through POA)

Document requirements may vary based on state and property type.

NRIs Selling Real Estate in India: Frequently Asked Questions (FAQs)

1. Can NRIs sell agricultural land in India?

NRIs are not permitted to purchase agricultural land in India. However, if you acquired agricultural land before becoming an NRI or inherited it, you are allowed to sell it—but only to a resident Indian.

2. What happens when an NRI sells property in India?

As an NRI, you are allowed to sell both residential and commercial properties in India. However, the sale proceeds are subject to Tax Deducted at Source (TDS), and capital gains tax—short-term or long-term—depending on how long you’ve held the property. The proceeds from the sale can be repatriated to your country of residence, subject to certain conditions.

3. How can NRIs avoid high TDS on property sales?

Buyers are required to deduct TDS at the time of purchase from an NRI seller. However, you can reduce or eliminate this deduction by obtaining a NIL or lower deduction certificate from the Income Tax Department before the sale is executed.
The assessing officer issues this certificate based on the actual capital gains liability. If TDS has already been deducted at a higher rate, you may claim a refund while filing your income tax return.

4. Where can NRIs deposit property sale proceeds?

The sale proceeds must be credited to your Non-Resident Ordinary (NRO) account in India.

5. Can the sale proceeds from a property purchased as a resident Indian be repatriated?

Yes, you may repatriate the funds to your country of residence, provided the amount does not exceed USD 1 million per financial year, and the applicable taxes have been paid.