NRI Property Sale in India: Navigate Income Tax Rules for Informed Decisions

by Godrej Properties Limited

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When Non-Resident Indians (NRIs) decide to sell their property in India, they must adhere to the income tax rules applicable to such transactions. This article provides valuable insights into the tax implications and what happens if an NRI sells property in India. Understanding the tax rates, calculation methods, and exemptions available help navigate NRI property sales.
 

For NRIs selling property in India, capital gains tax applies. Short-term gains are taxed per income slab if a property is held <2 years. If held >2 years, long-term gains get taxed at 20% with indexation. Buyer deducts TDS at 20%/30% rate for LTCG/STCG. Consult a tax advisor for DTAA and exemptions and make the best out of your investment.
 

NRI Capital Gains Tax on Property

An NRI selling property in India becomes liable to pay the NRI capital gains tax. Additionally, if an NRI has inherited the property, the original owner's purchase date is essential to determine long-term or short-term capital gains.
 

Short-Term Capital Assets (STCA)

Short-term capital gains get generated from the sale of immovable property, such as buildings, houses, or land, held for less than 24 months. 
 

Long-Term Capital Assets (LTCA)

Long-term capital assets are properties held for more than 36 months. The profit from selling such assets is known as long-term capital gain, and the tax rate for this category is 20%.
 

TDS Deductible Rules for NRI Selling Property in India

During the sale of property by NRI, the buyer is responsible for deducting Tax Deductible at Source (TDS) at the rate of 20%. However, if the property gets sold within two years of its purchase, the applicable TDS rate is 30%.
 

Nri Selling Property in India Tax Implications: Exemptions Under Section 54 and Section 54ec

NRIs can reduce their tax liabilities by investing capital gains in buying other residential properties. Under Section 54 of the Income Tax Act, an NRI can avail of tax exemption from capital gains if reinvested in residential property within three years of sale. The exemption gets provided for the total amount of capital gains. However, an NRI can purchase only one residential property for this purpose.
 

Income Tax Rules for NRI: Things to Remember

  • TDS must be paid when the property's value exceeds Rs 50 lakh.
  • TDS should be deducted by the buyer and submitted to the Indian tax authorities.
  • NRI property sale tax is a 20% tax on long-term capital gains.
  • Sale proceeds must be transferred to the NRO account.

Conclusion: Key Considerations for NRIs

Whether you are an NRI or an Indian citizen, you must pay taxes. Additionally, any NRI selling a property in India must pay due taxes. Taxes need to get paid on capital gains in India in accordance with the income tax regulations for NRIs. NRIs who inherited the property are likewise subject to NRI capital gains tax.
 

FAQs

Q: What are the income tax rules for NRI while selling a property?

A: On long-term capital gains, 20% tax gets paid. Income tax gets levied on short-term capital gains as per income tax slabs.
 

Q: How can NRI save taxes as per income tax rules for NRI while selling a property?

A: Selling property under Sections 54 and 54EC can help an NRI save on income taxes.
 

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