Real Estate investment and later selling property acquired in India by NRIs have always been a significant area inviting many queries. RBI governs sale and purchase of property by NRIs under FEMA (Foreign Exchange Management Act), 1999. RBI grants general Permission for property transactions by NRIs in India, and in some cases, specific permission of RBI is required. The rules and regulations have been simplified and made investor friendly
NRIs may want to sell the property as it is difficult to maintain if there is no plan to visit India or rent out the same and burden their family friends for payment of property tax, maintenance charges and other municipal dues
A Canadian Citizen who had inherited a property in India wanted to sell his property here in India and repatriate the sale proceeds. We answered the queries as follows:
Which property can be sold and to whom
- Any property can be sold to a resident Indian – residential or commercial whether purchased, inherited or gifted.
- In case the buyer is NRI – any property except agricultural land, plantation property and farmhouse.
Repatriation – It is a vast topic, but here we are confining ourselves to repatriation of sale proceeds only.
Sale proceeds can be legally and safely remitted through proper banking channels. Asset bought in India can be sold if they are purchased confirming to all the rules and regulations of foreign exchange. Once the property is sold, the next step is to repatriate the funds abroad:
If inherited/gifted -property is sold
- The sale amount is deposited in NRO account. Repatriation is allowed up to USD One million per financial year. If remittance increases US dollar one million in a financial year, permission of RBI is required.
- If the property has been inherited from a person residing outside India, special permission of RBI is needed.
- NRIs can acquire agricultural land in India only through inheritance, and the same can be sold only to a resident Indian.
If the purchased property is sold:
a. The property was purchased while being a resident Indian
- The sale proceeds are credited to NRO account and remittance from NRO account is allowed up to USD One million in a financial year after payment of tax.
- The repatriation, in this case, is allowed only if the property is held for 10 years. If not, the sale proceeds are held in NRO account to complete 10 years.
b. The property was purchased as NRI
- If the property was purchased using money resources in India (loan from bank or family friends) – sale proceeds are credited to NRO account. Repatriation limit is the same as in point a. Permission from RBI is required if remittance is more than that.
- If the property was purchased on loan, repatriation is allowed up to the loan repayment amount made through NRE/FCNR accounts or remittance of foreign currency through banking channels.
- If the property was purchased using foreign currency funds from NRE /FCNR account, the maximum amount of repatriation could be the foreign currency equivalent of the amount paid for the purchase.
In such case, repatriation of the entire principal amount is done without any restriction subject to the condition of repatriation of two residential properties only — no limit for commercial properties. Capital gains/profits are deposited in NRO account and are repatriated subject to condition of USD one million per financial year.
The repatriation limit applies to one person per financial year.
Documents required for repatriation of sale proceeds:
- Certificate from Chartered Accountant – Form 15 CB
- Certificate from income tax department – Form 15 CA
- Application in a bank for foreign exchange
- Proof of inheritance in case of sale of inherited property
- Document proving sale
It is always advisable to hire a lawyer to ensure proper documentation and smooth repatriation of sale proceeds.