Legal Considerations for NRIs Selling Property in India

Selling property in India as a Non-Resident Indian (NRI) involves navigating various legal, financial, and regulatory considerations. This comprehensive guide outlines the essential steps and requirements to ensure a smooth and compliant transaction.​

Legal Framework for NRIs Selling Property in India

According to Section 6(5) of the Foreign Exchange Management Act (FEMA), 1999, NRIs are permitted to sell residential or commercial properties in India to:

• A person resident in India.​
• Another NRI or a Person of Indian Origin (PIO).​

However, NRIs can only sell agricultural land, plantation properties, or farmhouses to Indian citizens residing in India. ​

Documentation Required for Selling Property

To facilitate the sale of property in India, NRIs should prepare the following documents:

1. Passport and Visa: Proof of identity and NRI status.​
2. PAN Card: Mandatory for tax purposes in India.​
3. Property Documents: Original purchase agreement, title deed, and any previous sale deeds.​
4. Tax Returns: Copies of Income Tax Returns filed in India, if applicable.​
5. Encumbrance Certificate: Indicates that the property is free from any legal liabilities.
6. No Objection Certificate (NOC): From relevant authorities, ensuring there are no dues or legal impediments.​
7. Power of Attorney (if applicable): If the NRI cannot be present, a legally notarized and registered Power of Attorney (PoA) can authorize a representative to execute the sale.​

Tax Implications and TDS

When an NRI sells property in India, the buyer is required to deduct Tax Deducted at Source (TDS) at the time of payment. The TDS rates are:​

• Long-Term Capital Gains (LTCG): If the property is held for more than two years, a TDS of 20% is applicable on the gains.​
• Short-Term Capital Gains (STCG): For properties held for two years or less, TDS is deducted at the applicable income tax slab rates of the NRI.​

NRIs can avail exemptions under sections 54, 54F, and 54EC of the Income Tax Act by reinvesting the capital gains in specified assets or bonds. ​

Repatriation of Sale Proceeds

NRIs can repatriate the proceeds from the sale of property in India, subject to the following conditions:​

1. Amount Limit: Repatriation is restricted to a maximum of USD 1 million per financial year, including all other capital transactions.​
2. Tax Compliance: All taxes due in India must be settled before repatriation.​
3. Property Acquisition: The property should have been acquired in accordance with FEMA regulations.​
4. Repatriation of Inherited Property: For inherited properties, NRIs must provide documentary evidence of inheritance and comply with tax regulations.​

The sale proceeds must first be credited to the NRO (Non-Resident Ordinary) account, from which repatriation can be initiated. ​

Utilizing Power of Attorney

If an NRI is unable to be physically present in India for the transaction, they can appoint a trusted individual as their Power of Attorney (PoA). The PoA should be:​

• Notarized and attested by the Indian Embassy or Consulate in the country of residence.​
• Stamped and registered in India within the stipulated time frame.​

This legal authorization enables the representative to execute the sale on behalf of the NRI. ​

Final Thoughts

Selling property in India as an NRI requires careful planning and adherence to legal and tax regulations. By ensuring proper documentation, understanding tax liabilities, and complying with repatriation procedures, NRIs can facilitate a seamless property transaction. Engaging with legal and financial professionals is advisable to navigate the complexities and ensure compliance with all statutory requirements.