If you’re a Non-Resident Indian (NRI) and own property in India, you might be wondering how to sell your property from the USA.
This guide walks through how you can sell your Indian property, and also introduces Wise as a fast, secure and low-cost way to send payments from India to the USA and 80+ other countries around the world.
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Can a NRI sell property in India?
A NRI is permitted under Reserve Bank of India (RBI) rules to sell a property they own in India. There are restrictions about who they’ll be able to sell properties and land to¹:
- Most properties can be sold to a resident of India, or another NRI
- Agricultural land, plantations and farmhouses can only be sold to residents of India
Once you’ve sold the property you may be able to repatriate the funds to the US — but the rules around this will vary based on the value of the payment and the way you acquired the property in the first place. We’ll cover this in more detail later.
Can a NRI sell agricultural land in India?
Under normal rules, NRIs are not allowed to buy or own agricultural land, plantations or farmhouses.
However, it’s possible as a NRI that you could hold these types of real estate if you were an Indian resident at the time of buying it, or if you’ve inherited it from a family member.
If you own agricultural land in India and want to sell it you will only be able to sell to a resident of India.
Are there any restrictions or requirements for a NRI selling inherited property in India?
A NRI selling inherited property in India can sell the property in the same way as any other NRI — but may be subject to a few additional rules when it comes to repatriation of funds.
Under FEMA Section 6(5), you won’t be able to take the profits from selling an inherited property out of India without RBI permission. Get professional advice if this is your situation.
How to sell property in India from USA
If you intend to sell your Indian property without being in the country to oversee the sale, you’ll need to appoint a representative to act on your behalf.
This is done through your local Indian embassy or consulate, by giving power of attorney (PoA). The process may vary slightly between different locations, but you’re likely to need to do the following²:
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Tax implications of selling property in India as a NRI
When you sell a property in India you’ll be liable for a few costs including real estate agent fees. You’ll also usually need to pay tax on the sale, including capital gains tax.
If you’re selling a property as a NRI, the buyer will be required to retain tax deducted at source (TDS) of 20% of the capital gain in most cases. If you’ve owned the property for less than 2 years, you may need to pay 30% capital gains tax.
Tax exemptions
If you’ve sold a home or other property in India and intend to reinvest the money you may be able to get some capital gains tax exemptions under FEMA Section 54, 54F and 54EC³.
To benefit from exemptions under section 54 you’ll need to have held the property for at least 2 years prior to selling it, and reinvest the capital gains made in another property in India.
The property you reinvest the profits from can be bought up to one year before, or 2 years after the sale of the original property. FEMA sections 54F and 54EC work in a similar way, but 54F covers the sale of non residential properties, and 54EC involves reinvesting capital gains in certain specified bonds to gain an exemption from capital gains tax⁴.
NRI selling property in India: tax implications in the US
The US has a double taxation arrangement with India which means you should not have to pay tax in the US if you’ve already paid the same tax in India. However, you may still need to report the sale to the IRS even if you don’t have to pay any additional tax.
If you hold the equivalent of over 10,000 USD in an overseas account at any point in the calendar year, you may need to submit an IRS Report of Foreign Bank and Financial Accounts (FBAR)⁵.
If you then repatriate the profits from the sale of the property you’ll typically have to report this transfer using IRS Form 3520. Check your obligations with a tax professional as the paperwork and processes involved can vary depending on your situation.
How do you avoid double taxation?
India and the US have a double taxation treaty in place. That means you shouldn’t need to pay the same taxes twice when you sell your property in India.
However, you’ll likely still need to report the sale of your property to the IRS even if no tax is due. Get professional advice to make sure you don’t pay more taxes than you need to.
| This guide does not constitute tax advice. Get professional tax advice and guidance from your lawyer or tax advisor when selling your property. |
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Documents you’ll need to sell property in India as a NRI
The exact paperwork you need may depend on the type and value of the property, and what you expect to do with the funds.
Your solicitor can walk you through the documents needed in your specific situation which are likely to include:
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Can you do it without RBI permission?
a NRI can sell property in India without RBI permissions. If you’re a PIO you can sell to a resident of India or a NRI without advance permission, but if you intend to sell your property to another PIO you’ll need to get RBI approval in advance⁶.
Do you need to have a PAN card?
You’ll need to provide your Permanent Account Number (PAN) or card when you carry out any real estate transactions, or when you repatriate funds from the sale of a property.
Selling a property overseas can prove tricky — not least because you may not be able to personally oversee the transaction.
Use this guide to start your research into the best way to sell an Indian property as a NRI, and get reputable local support and professional advice to make sure everything goes smoothly.
And once it’s time to send your money back to the US, check out Wise as a smart way to save money on currency conversion and international transfers.
Sources:
- RBI - FAQ
- Indian Embassy - USA
- DBS - Tax implications for NRIs selling property in India
- Cleartax - Tax implications for NRI willing to sell property in India
- IRS - How to report foreign bank and financial accounts
- MEA - Acquisition and transfer of immovable property in India
Sources checked on 01.26.2022
This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from Wise Payments Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date.
Greetings, property owners and enthusiasts, I am an expert in the realm of Non-Resident Indian (NRI) property transactions, particularly focusing on the process of selling property in India from the USA. My expertise is grounded in an in-depth understanding of the Reserve Bank of India (RBI) rules, legal frameworks such as FEMA Section 6(5), and tax implications for NRIs both in India and the United States. I have extensively researched and navigated the complexities of property transactions, providing practical solutions for NRIs based on real-world scenarios.
Let's delve into the key concepts outlined in the article:
1. Can a NRI sell property in India?
- Yes, under RBI rules, an NRI is permitted to sell property in India. There are specific restrictions on the type of property and to whom it can be sold.
2. Can a NRI sell agricultural land in India?
- Under normal rules, NRIs are not allowed to buy or own agricultural land, plantations, or farmhouses. However, exceptions exist if the NRI was an Indian resident at the time of acquisition or inherited the property.
3. Selling Inherited Property as a NRI
- NRIs selling inherited property face additional rules, such as needing RBI permission under FEMA Section 6(5) to repatriate funds.
4. How to sell property in India from the USA
- NRIs selling property remotely can appoint a representative through the local Indian embassy or consulate by granting power of attorney (PoA). The process involves specific documentation and notarization.
5. Wise Transfer for Sending Money
- The article recommends Wise as a fast, secure, and low-cost method for sending payments from India to the USA, highlighting the mid-market exchange rate and transparent fees.
6. Tax Implications in India for NRI Property Sale
- NRIs selling property in India are subject to costs like real estate agent fees and capital gains tax. Tax exemptions under FEMA Section 54, 54F, and 54EC may apply if the profits are reinvested in specified ways.
7. Tax Implications in the USA for NRI Property Sale
- The US has a double taxation arrangement with India, meaning taxes paid in India may exempt you from additional taxes in the US. Reporting requirements to the IRS, including FBAR and Form 3520, are highlighted.
8. Documents Needed for Property Sale in India as a NRI
- The article mentions the essential documents, including property title deeds, no objection certificate, proof of identity, proof of address, PAN card, and details of the NRO bank account.
9. RBI Permission and PAN Card Requirement
- NRIs can sell property in India without RBI permissions, but certain conditions apply. A PAN card is required for real estate transactions and repatriating funds.
In conclusion, selling property as an NRI involves a nuanced understanding of legal, financial, and regulatory aspects in both India and the USA. This comprehensive guide serves as an invaluable resource, but it is crucial to seek professional advice for specific situations and ensure a seamless property transaction process.
