NRI selling property in India can legally repatriate money abroad. However, it is generally seen that NRI transfer money obtained from property sell via private money transfer method or unauthorized channel. This may be due to lack of knowledge or ignorance. The private money transfer method used for transferring money earned from property sell is illegal. In this post, I will explain the rules applicable to the repatriation of a fund by NRI post property sale.
How NRI can transfer money abroad from property sale?
NRI can buy or sell any property in India without any restriction except agriculture land, plantation property or farm house. When it comes to a repatriation of fund source or channel via which this fund was infused for buying a property is important.
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Case 1 – Property was purchased from fund received in India towards Inward remittance
The repatriation of a principal fund to the home country is allowed without any lock-in period if a property was purchased by NRI from the inward remittance fund. No permission from RBI is required for such case. There is no upper limit on the amount which can be repatriated under such case.
The case mentioned above is applicable up to two residential properties and unlimited commercial properties. From third residential property onwards, the NRI has to deposit money into NRO account. The money deposited in NRO account can be repatriated to home country with an applicable limit of 1 Million USD per financial year.
TDS is applicable on the profit earned by selling a property. If a property is sold after three years from the date of purchase long term capital gain tax @20% is applicable. The gains are calculated as a difference between sale value and indexation cost of purchase.
The TDS can be waived off in case NRI re-invest capital gains for the purchase of another property.
Example – 30,000 US$ are sent from the USA by NRI to purchase property in India. After few years the property is sold by NRI with a price of 40,000 US$. The principal amount 30,000 US$ can be transferred to USA immediately. The remaining amount needs to be deposited in NRO account.
Case 2 – Property was purchased from fund lying in NRO account in India
The repatriation of fund up to limit of USD 1 million is allowed per financial year if a property was purchased from the fund lying in NRO account in India. In this case, NRI has to deposit both principal and profit amount into NRO account. The tax treatment applicable in this case will be same as that of case 1.
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Case 3 – Property was inherited by NRI
In a case when NRI has inherited property from a person residing in India repatriation of money is allowed without taking permission from RBI. However, if a property is inherited from a person residing outside India specific permission from RBI is required for repatriation of a fund. In addition to that certificate from Chartered accountant in a specific format is also required.
Procedure and Rules to repatriate money abroad by NRI
- The property must be procured by NRI in accordance with a provision of foreign exchange law.
- The amount of repatriation should not exceed the amount paid for the purchase of property.
- The maximum repatriation amount should not exceed 1 million USD per financial year.
- The repatriation is allowed up to maximum two residential properties.
- Documentary evidence is required in support of acquisition or inheritance.
- A tax clearance or NOC is required from Income Tax authority.
- The certificate from CA as well as bank account statement is required.
The first step towards repatriation is a requirement of a certificate from CA. This certificate is also called as form 15CB.
The form 15CB can be downloaded from NSDL website. The CA will fill this form and sign it. This form is evidence that money intended to send abroad is obtained from the property sale and all tax dues were paid.
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The second step is to visit Income tax e-filing portal and login. After login go to e-file and select “Prepare and submit Online Form (other than ITR)”. Select 15CA from the drop down option.
Select Part C under section 15CA and provide acknowledgment number of uploaded 15CB. Once you press continue button Form 15CA will appear, Fill the mandatory details and submit the form. On submission, e-mail will be triggered with acknowledgment number to your email address.
You can view status by navigating to My account > View Form 15CA.
Income tax guide for Filling From 15CA
Once you completed above procedure you can visit Bank with Form 15CB, Form 15CA. The bank will provide you Form A2.
Fill up form A2 and attach required document such as sale document of property, Will and death certificate (Inherited property).
On completion of above process, fund can be transferred to abroad by NRI.
Hope I have answered your query about transferring fund to abroad via property sale.
For more information, get in touch with competent Chartered Accountant on a subject matter.