NRI Repatriation Rules: Many people have left India and settled abroad, but their connection to India remains. Be it a house, a shop, or a farm, many NRIs own property in India. When they sell it, the biggest question is how to send the money abroad. It sounds simple, but there are numerous regulations related to FEMA, RBI, and Income Tax.
If the documents and approvals are obtained correctly, sending the money becomes quite easy. However, if any mistakes are made, they may face both delays and penalties.
Who can sell the property?
If an NRI owns residential or commercial property, they can sell it to an Indian citizen, another NRI, or a Person of Indian Origin (PIO), but under FEMA rules. If an NRI owns agricultural land, a farmhouse, or a plantation, they can sell it only to an Indian citizen. NRIs can mortgage their property only with an Indian bank or a registered housing finance company.
Rules for sending money abroad: When and how much can you send?
If an NRI purchased property while living in India, i.e., before becoming an NRI, they can sell the property and send up to $1 million (approximately Rs. 8.3 crore) abroad annually. This transfer is only permitted through authorized banks under FEMA regulations. If the amount exceeds this limit, you will need special permission from the RBI.
If you purchased property in India after becoming an NRI, using a foreign currency, NRE, or FCNR account, you can send the entire sale amount abroad. However, this facility is only available for two residential properties in a lifetime. If you follow the correct rules and complete the documentation, there is no problem in sending money abroad.
What are the rules for inherited property?
If an NRI wants to sell an inherited property in India and send the money abroad, they must first submit a will or legal heir certificate. A tax clearance certificate is also required. The same $1 million annual limit applies to such transfers. If the inheritance is from another NRI, RBI approval may be required. This means that if the documents are complete, the process is easy; otherwise, obstacles may arise.
Step-by-step method for repatriating money:
- After selling the property, deposit the money into an NRO account.
- Fill Form 15CA, 15CB, and the Repatriation Application.
- Also submit documents such as the tax clearance, sale deed, and bank statement.
- The bank will verify the money, and then the money will be sent abroad.
What does the tax math say?
If the property you sold is less than three years old, the gain on it will be taxable according to your income tax slab. This means that the tax will be levied based on your income. However, if the property is more than three years old, it will be taxed at 20%, although it does benefit from indexation.
Indexation means increasing the purchase price based on inflation to reduce tax. For example, if you purchased a property for ₹10 lakh and, due to inflation, its indexed value is ₹14 lakh at the time of sale, tax will be levied based on the purchase price of ₹14 lakh, reducing your taxable gain.
Furthermore, if you reinvest the proceeds from the sale in a new property or government bonds (Section 54/54EC), you may also receive a tax exemption.
If you have the right documents and planning, remitting money becomes quite easy. But if any rule is missed or the document is incomplete, then both delay and penalty may be faced.
