NRI’s guide- Factors to consider while selling NRI’s property in India
Legalities involved in the purchase of immovable assets by NRIs have been discussed in the earlier column. Here we will discuss the legal requirements and formalities to be complied with for sale off immovable assets owned by NRIs.
An NRI can sell residential or commercial property in India to any resident Indian, an NRI or Person of Indian origin (PIO). However, agricultural, plantation land or a farm house can be sold only to a person who is resident in and citizen of India. Now we will discuss post-sale aspects of repatriation of the sale proceeds and taxation.
Repatriation of sale proceeds:- Depends upon the status of the owner at the time of purchase of the property. If it was purchased as resident Indian then sale proceeds have to be deposited in NRO (Non Resident Ordinary) account and a maximum of 1 million US dollars per calendar year can be repatriated from that account.
In case the property to be sold has been purchased as an NRI then again
(a) If the purchase price was paid out of rupee resources, means income earned in rupees or purchased from home loan availed in India and the loan is repaid out of income earned in rupee, then the applicable repatriation is as in case of “Resident Indian” discussed above.
(b) In all other cases, repatriation of sale proceeds is regulated and subject to following:-
(1) If the fund for purchase of the property was foreign remittance channelized through normal banking system then repatriation cannot exceed inward remittance for purchase.
(2).If the funds in FCNR account were used for purchase then repatriation of sale proceed cannot exceed that amount.
(3) If purchased through funds in NRE account then repatriation amount cannot exceed foreign exchange equivalent to amount paid through that account.
(4) If purchased through home loan then repatriation cannot exceed amount of loan repayment.
(5) If purchased through balance in NRO account then entire sale proceed to be deposited in that NRO account and maximum repatriation allowed 1 million US Dollar per calendar year.
In all the aforesaid cases, repatriation is restricted to sale of two residential properties only. The incidence of taxation will be discussed separately in another article.
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