Repatriating funds from the sale of property in India as a Non-Resident Indian (NRI) involves several steps, and it must be done in compliance with the regulations set by the Reserve Bank of India (RBI) and the Foreign Exchange Management Act (FEMA). The process ensures that the money is sent abroad legally and within the specified limits. Below is a step-by-step guide to repatriating the sale proceeds from property as an NRI:
1. Eligibility for Repatriation
- Non-Resident Indian Status: You must be an NRI, meaning you reside outside India for more than 182 days in the preceding financial year.
- Property Type: The property being sold must be residential or commercial. If the property is agricultural land, farmhouses, or plantations, repatriation is not allowed unless inherited from a relative.
2. Conditions for Repatriation
- Amount Limit: The amount that can be repatriated is limited to the original investment made in the property in foreign currency, along with any appreciation in value. You cannot repatriate more than the original sum you invested in the property (including the principal amount and capital appreciation).
- Capital Appreciation: In case of capital gains (appreciation of property value), the funds from the sale can be repatriated, subject to applicable capital gains tax.
- NRE/NRO Account: The funds should be in an NRE (Non-Resident External) or NRO (Non-Resident Ordinary) account for repatriation.
3. Steps to Repatriate Sale Proceeds from Property
Step 1: Ensure Compliance with Tax Requirements
- Before repatriating the sale proceeds, you need to ensure that capital gains tax has been paid on the sale of the property.
- Tax Filing: If you have earned capital gains, file your income tax return (ITR) in India. You will need to show proof of tax payment to the bank or financial institution where you wish to transfer the funds.
- TDS Deduction: When selling the property, the buyer will deduct Tax Deducted at Source (TDS) at the applicable rate (20% for long-term capital gains or 30% for short-term capital gains) and deposit it with the government. If the sale proceeds exceed the specified limit, you must show the TDS certificate while repatriating the funds.
Step 2: Open an NRE or NRO Account
- NRE Account: If the sale proceeds are in an NRO account, you may need to transfer them to an NRE (Non-Resident External) account. The NRE account allows easy repatriation of funds to your country of residence.
- NRO Account: Funds held in an NRO account can also be repatriated, but there are restrictions on the amount that can be transferred. Typically, you can repatriate up to USD 1 million per financial year from your NRO account, including the principal and interest, subject to tax payment.
Step 3: Obtain a Tax Clearance Certificate
- To repatriate the funds, you must obtain a tax clearance certificate from the Indian income tax department. This certificate confirms that all applicable taxes, including capital gains tax, have been paid on the property sale.
- Capital Gains Tax: You will need to provide documents such as Form 15CA and Form 15CB to the bank, confirming that tax liabilities have been settled.
Step 4: Submit Documents to the Bank
- Documents Required:
- Sale Deed: A copy of the sale deed and the agreement for the sale of the property.
- PAN Card: A copy of your Permanent Account Number (PAN) card.
- Tax Payment Receipts: Proof of capital gains tax payment and TDS certificate.
- Tax Clearance Certificate: From the income tax department confirming that taxes have been paid.
- Repatriation Request: A formal request to your bank or financial institution asking for the repatriation of funds.
- Proof of Ownership: Documents establishing that you are the legal owner of the property being sold.
Step 5: Repatriation Process via Authorized Dealer
- Banks and financial institutions in India will act as authorized dealers for foreign exchange transactions. You need to approach your Indian bank where you hold your NRE or NRO account.
- The bank will verify all your documents, including proof of tax clearance, ownership, and the amount being repatriated.
- The bank will then process the request and transfer the funds to your foreign bank account in foreign currency (usually USD or the currency of your country of residence).
Step 6: Repatriation Limits and Regulations
- Limitations on Repatriation: NRIs can repatriate up to USD 1 million per financial year from their NRO account. For amounts greater than this, special approval from the RBI may be required.
- Currency Exchange: The funds will be converted into the currency of your country of residence at the prevailing exchange rates.
- The repatriation must comply with FEMA guidelines, and you should only transfer funds from India through legal channels.
4. Tax Considerations for Repatriation
- Capital Gains Tax: If you made a profit (capital gains) from the sale of the property, you need to pay capital gains tax. The tax rate depends on whether the property is held for a short-term (less than 2 years) or long-term (more than 2 years):
- Short-Term Capital Gains (STCG): If the property is sold within 2 years, the gains are taxed at 30% (without indexation).
- Long-Term Capital Gains (LTCG): If the property is sold after 2 years, the gains are taxed at 20% with indexation benefits.
- TDS: The buyer will deduct TDS (tax deducted at source) on the sale proceeds, which can be adjusted against the final tax liability when filing your income tax return.
- Form 15CA/15CB: Before repatriation, you must fill out Form 15CA and submit it to the Indian bank. For amounts exceeding a certain threshold, you may need Form 15CB, which is certified by a chartered accountant, to confirm tax compliance.
5. Repatriation Procedure Checklist
- Pay capital gains tax and file income tax returns.
- Obtain the Tax Clearance Certificate from the income tax department.
- Ensure the sale proceeds are in your NRE or NRO account.
- Submit the following documents to your bank:
- Sale deed and agreement.
- Proof of PAN card and tax payment.
- Form 15CA and Form 15CB (if applicable).
- Request for repatriation.
- Your bank will process the repatriation request and transfer the funds to your foreign bank account.
Conclusion:
Repatriating funds from the sale of property in India as an NRI involves multiple steps and adherence to regulatory requirements set by the RBI and FEMA. The process includes ensuring tax compliance, obtaining the necessary clearance certificates, and submitting the appropriate documents to the bank. The amount you can repatriate is generally limited to the original investment, and you must comply with all tax laws before transferring funds abroad. Always consult with a financial advisor or tax consultant to ensure smooth repatriation and avoid any legal issues.