For NRIs living in the USA and looking to sell property in India while repatriating the proceeds, here’s an in-depth guide to help you navigate through the process.
Power of Attorney (POA)
Can NRIs give POA to their father or someone else? Yes, NRIs can grant a Special Power of Attorney (SPA) to a trusted person, such as a parent, to handle property transactions. This involves:
- Drafting the SPA: Clearly outlining the powers granted.
- Notarization and Attestation: The SPA must be notarized and attested by the Indian Consulate/Embassy in the USA.
- Registration in India: Finally, it should be registered at the local Sub-Registrar’s office in India.
Tax Implications
Capital Gains Tax:
- Short-Term Capital Gains (STCG): Gains from property held for less than two years are taxed at the NRI’s slab rate.
- Long-Term Capital Gains (LTCG): Gains from property held for more than two years are taxed at:
- 20% with indexation: Allows adjustment for inflation, potentially reducing taxable gains.
- 12.5% (plus surcharge) without indexation.
Tax Deducted at Source (TDS):
- 1%: For properties sold by a resident Indian, if the sale exceeds ₹50 lakh.
- 20%: For properties sold by an NRI with LTCG.
- 30%: For properties sold by an NRI with STCG.
GST Implications:
- Residential Property: No GST applicable.
- Commercial/Under-Construction Property: GST may apply.
Repatriation of Funds
Steps to Repatriate Proceeds:
- Credit to NRO Account: Sale proceeds are first credited to the NRO (Non-Resident Ordinary) account.
- Transfer to NRE Account: Funds can then be transferred from the NRO to the NRE (Non-Resident External) account.
- Repatriation: Up to USD 1 million annually under the Liberalized Remittance Scheme (LRS), with necessary documentation including Form A2, Form 15CA, and Form 15CB (CA-certified tax clearance certificate).
Specific Scenarios:
- Property Purchased as a Resident Indian:
- Proceeds must go to the NRO account.
- Limited to repatriation from the sale of two residential properties.
- A ten-year holding period is required unless the funds remain in the NRO account for the duration.
- Property Purchased as an NRI:
- Repatriation without the ten-year wait, subject to foreign exchange regulations at purchase time.
Other Considerations
Is Aadhar and PAN Card needed?
- Aadhar Card: Not required.
- PAN Card: Required for transactions.
Tax Savings Possibility: NRIs can save on long-term capital gains by investing in specified 54EC bonds, including those issued by NHAI, REC, PFC, and IRFC.
Eligibility for 54EC Bonds:
- Must hold the property for at least 24 months.
- Invest in bonds within 6 months of property sale.
- Maximum investment is INR 50 lakhs per financial year.
- Bonds have a 5-year lock-in period.