Selling Property in India as an NRI is a challenging process. NRIS needs to understand and follow the legal and procedural aspects of selling their property.
NRIs can get maximum benefit in the value of their property by understanding the Process of Selling Property in India and avoid legal and tax-related issues. It involves several important aspects such as Property Selling Legal Requirements for NRIs, taxation, and the role of power of attorney.
With the right information and strategy, NRIs can sell their property safely and securely. Here, we will discuss the process of selling property in India as an NRI.
Legal Considerations for NRIs Selling Property in India
According to the legal aspect of the NRI Property Sale Process in India, NRIs have the right to sell their residential and commercial properties. They have to pay tax for selling property which comes under the Foreign Exchange Management Act (FEMA) and Income Tax Act.
Capital gains tax is levied on the amount received from the sale of their property. The buyer is required to deduct 20% TDS on that amount received. It is also necessary for NRIs to prove the authenticity of all documents.
If you want to understand the process of property investment in India for NRI, you must know about legal considerations for NRIs selling property in India. You need to know the rules of 15CA/15CB to send the sale amount of property to foreign countries. It is used to verify the deduction of taxes and the completion of other regulatory requirements.
The following property laws apply to NRIs in India-
- FEMA
- Income tax act
- Transfer of Property Act
- Stamp Duty and Registration Act
- Representation rule
- Inheritance Laws
Who is Eligible to Sell Property in India?
It is not common for an NRI to sell property in India. First, he has the right to buy and sell only residential and commercial societies. At the same time, there is a ban on the purchase of farmhouses, plantations or agricultural land. Yes, but he can get these properties in inheritance.
For the sale of property, an NRI must have some documents which is mentioned below-
- PAN card
- Encumbrance Certificate
- NOC
- Tax payment record
- Property Tax Receipts
- Valid ownership certificate
- Dispute-free property certificate
Power of Attorney: A Crucial Document:
Power of Attorney for NRI Property Sale is an important document that helps in saving their travel expenses and time. If they cannot be physically present while selling the property, they can take the help of the Power of Attorney. Under this, they can send all the documents for property sale to a trusted person on their behalf and get all the processes completed legally.
To give Power of Attorney to someone trusted, first of all, you have to prepare a legal document. In this, the rights of the representative are clearly described. After this, it is verified at the Indian Embassy. Then Power of Attorney becomes legal to be given to the trusted person.
Steps Involved in Selling Property in India:
Step 1: Valuation of Property
You must complete the property valuation process to determine the market value of the property. This process analyses factors such as size, location, regional market rate, and surrounding properties of the property are analyzed to determine the correct cost of the property.
Step 2: Clear Title of Ownership
Any person must have an ownership certificate to be the legal owner of the property. Here, a clear title deed proves the legal ownership of the property to any NRI, dispute-free property, and its clarity. This increases the confidence of the buyer and the sale process is legally smooth.
Step 3: Agreement to Sell
Agreement to sell is the first agreement between the seller and the buyer. Here are some most common terms in agreement to sell.
- Property Description
- Sale price and payment terms
- Final registry deadline
- Dispute resolution process
Buyers must pay 10-20% of the total property value in the first instalment as down payment. Notably, they generally have 2-3 months to pay it.
Step 4: Sale Deed
A sale deed is a type of legal document which records the transfer of property from seller to buyer. It is mandatory to register this document in the property registry office. For this, the seller must bring some essential documents-
- Title deed
- PAN card
- Property tax receipts
- NOC
- Proof of identity and address (buyer-seller)
Step 5: Registration of Sale Deed
The owner of the property is given legal recognition under the sale deed registration. This ensures protection from future disputes.
For this, prepare the document and present it in the sub-registrar office and pay the stamp duty and registration fee. Ensure the presence of the seller and the buyer.
Tax Implications of Selling Property for NRIs:
- Capital Gains Tax
Under Capital Gains Tax for NRIs, if the property is held by the NRI for less than 2 years, the tax will be determined according to the income tax slab. But if the property is held by the owner for more than 2 years, then 20% tax is levied.
- Tax Withholding
TDS is a type of tax that is mandatory for the buyer to pay when the property is sold by the NRI. Notably, the Government allows you to refund it. Follow the below given process.
– File the Income Tax Returns.
– Check the details of TDS in Form 26AS.
– Apply for the refund of additional deductions in the Income Tax Department.
- Double Taxation Avoidance Agreement (DTAA)
DTAA is a pact signed by two nations that encourages capital investment as well as trade in goods and services. It prevents International Double Taxation. It is very beneficial for NRIs. It protects NRIs from paying taxes twice on the same income. There are many countries that have signed this agreement with India.
According to this, NRIs can easily avail the benefit of a low rate of Capital Gains Tax on the sale of their property. An NRI seller must have these two documents to enjoy exemption from the taxes.
- Form 10F
- Residence Certificate
Remittance of Sale Proceeds to Abroad:
How Can NRIs Transfer Sale Proceeds?
Under Remitting Sale Proceeds from India, any NRI can send the amount received by selling his property abroad through an NRO account.
Under the Foreign Exchange Management Act (FEMA), A person can send up to $1 Million per year abroad. But for doing so, the seller and buyer must follow all the legit RBI rules and Form 15C/15CB.
Currency Conversion and Repatriation Limits
Under FEMA rules, the limit for repatriation of money from India for NRIs is ₹1 million per financial year. It is necessary to follow special conditions related to tax and legal provisions for non-residents. Indian banks offer services like payment gateways, security, international transfers, and digital banking for transactions.
Also Read – Documents Required for NRI to Buy Property in India: A Complete Checklist
Common Mistakes to Avoid When Selling Property as an NRI:
NRIs often make common mistakes while selling property, which you should avoid.
- Neglecting Proper Documentation
- Not Considering Text Implementation
- Overpricing the Property
- Ignoring Local Market Trends
- Not Having a Power of Attorney
- Failing to Communicate with Buyers
- Skipping Legal Consultations
Check the legal aspects of the property with accuracy to avoid the mistakes mentioned here. Also, prepare the correct documents and follow the legal rules. After this, take guidance from an expert.
Under NRI real estate investment in India, selling your property for NRIs may be challenging. But by understanding the NRI property investment laws correctly, you can get a fair price and more profit.
While selling property in India, NRIs should check all the legal documents properly so that there is no legal problem in the future.
It is also important for NRIs to follow the correct tax laws. To stay free from tax-related disputes in the future.
Once you have explored all the laws, evaluate the property properly and do not make any mistakes in all the documents.
