Acquiring and selling property in India, as well as repatriating sale proceeds, may seem daunting for NRIs, but adhering to specific rules and regulations eases the process. Governed by the Reserve Bank of India (RBI) under the Foreign Exchange Management Act (FEMA), these transactions entail the following guidelines.
Purchase of Property by NRIs
NRIs and Persons of Indian Origin (PIOs) can legally buy residential and commercial properties in India without prior RBI permission.
The purchase amount must be paid in Indian Rupees via normal banking channels or NRI bank accounts under FEMA and RBI regulations.
They can inherit property from Indian residents but cannot buy agricultural land, plantation property, or farmhouses.
Sale of Property by NRIs
NRIs can sell their properties to Indian residents, NRIs, or PIOs, except for agricultural land, plantation property, or farmhouses, which must be sold to Indian residents.
Repatriation of Sale Proceeds
If selling a property bought while a resident of India, proceeds must be credited to the NRO account.
Repatriation is subject to various conditions, including holding the property for at least 10 years.
Sale proceeds can be repatriated up to USD 1 million per financial year, provided all tax liabilities are settled.
Taxation on Sale of Property by NRIs
Long-term capital gains tax of 20% applies if the property is sold after three years from the purchase date.
Short-term capital gains tax of 30% applies if sold within three years from the purchase date, irrespective of the tax slab.
Tax exemptions are available if sale proceeds are reinvested in another property within a specified period or invested in capital gain bonds.
Consultation and Professional Advice
Given the intricacies involved, it is advisable to seek professional guidance to navigate the nuances of property transactions for NRIs.
These guidelines outline the essential steps and considerations for NRIs engaging in property transactions in India, emphasizing the importance of compliance and expert advice.
Pitchers Global offers expert solutions and advice for NRI’s while simplifying their property transactions thus ensuring a smooth compliance.