Guide to Real Estate Woos of NRI’s: Best Real Estate Attorney Advice in India
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Legal Advice & Solutions for NRI’s & their Estates & Properties in India-6: Best NRI Legal Services in India
What factors should be taken into consideration by the NRIs before selling their estate properties in India?
Many NRIs reside outside of India have bought houses there but neglect to maintain them. As a result, after getting citizenship in their nation of residence, many even go as far as to sell their inherited or self-acquired property. Holding onto your properties, even when you can’t handle it, has become more common. Non-Resident Indians (NRIs) have been encouraged by the current real estate bubble in India to sell their homes there in order to benefit from the rise in land prices.
In order to make sure that the process goes well and that you are able to optimise your profits, there are a number of considerations that non-resident Indians (NRIs) intending to sell their estate property in India should take into account. The following are some crucial things to think about:
1. Understand the Tax Implications: When NRIs sell real estate in India, they must pay taxes like capital gains tax and TDS (tax deducted at source). To properly prepare and include these fees when determining your sale price, it is crucial to comprehend how these taxes operate and what you will be responsible for.
NRIs who sell their property within three years of buying it must pay capital gains tax at a rate of 20%. Although NRIs must pay 20% Tax Deducted at Source (TDS) on long-term capital gains, there are a number of circumstances in which an NRI may qualify for a relief. Short-term capital gains tax, which is levied at the TDS rate of 30% if an NRI sells the property before three years have passed since acquisition, is applied. An NRI has up to 6 months if he decides to invest in bonds and 2 years to invest in another property. The payment receipt or allocation letter must be presented in the event that an NRI wishes to purchase a new home, and an affidavit is required if capital gains bonds are purchased.
Tax Exemptions: Sections 54, 54F, and 54EC of the Income Tax Act allow NRIs to claim exemptions from long-term capital gains on the sale of real estate in India:
If an NRI purchases a residential property, sells it after three years, and then invests in another property within two years, the profit made is exempt up to the value of the new property. Consider the following scenario: If the new property costs 10 lakhs and the capital gains are 15 lakhs, the remaining 5 lakhs will be recognised as long-term capital gains.
According to Section 54EC of the Income Tax Act, an NRI is free from capital gains tax if he sells a residential property after three years and invests the proceeds in bonds. In addition, the bonds will be locked in for three years. According to Section 54F of the Act, an NRI must either acquire a residential property within one or two years of the date of transfer or construct a residential property within three years of the transfer date in order to be eligible for an exemption. The statute further stipulates that the new property must be located in India and cannot be sold for three years after being bought or built.
Also, an NRI should not own more than one home, nor should they buy or build within a 3-year window or inside a 2-year window.
2. Review the Property Documentation: Verify that all of the paperwork is in order and current before selling the estate property. Title deeds, property tax receipts, and other significant papers fall under this category. Also, you should confirm that the property is free and clear of any liens or other matters of law that could affect the sale.
3. Determine the Fair Market Value: It’s critical to accurately price your home, taking into account the local market and the property’s location. To assist you in determining a fair market value, you might want to think about working with a nearby real estate agent or appraiser.
4. Consider the Currency Exchange Rate: You can be sending the money from the sale of your property back to your country of residence if you’re an NRI. In this situation, it’s critical to monitor the currency conversion rate since it may have an effect on how much money you finally receive.
5. Plan for Repatriation: NRIs are permitted, with certain restrictions, to repatriate the sale earnings from their property to their country of origin. To make sure that you can repatriate your assets on time, it’s crucial to comprehend these requirements and plan appropriately. NRIs and people of Indian descent are typically granted permission to repatriation (send a person back to their country of origin) the earnings from the sale of property they inherited from an Indian citizen. The NRI does not need to get authorization from the Central Bank of India (RBI) if these requirements are satisfied. The NRI must request particular approval from the central bank if they have inherited property from an Indian citizen.
6. Seek Professional Advice: Inevitably, it’s a smart idea to collaborate with a group of experts to guide you through the estate property sale procedure in India. These might include a nearby real estate agent, a tax professional, and a property law attorney.
You can make sure that the sale of your estate property in India goes well and that you are able to optimise your profits by keeping these aspects in mind and working with a team of experts.
Criteria For NRI To Sell Property In India
In essence, these regulations only apply when an NRI sells their property to someone else:
• Only an Indian citizen, another NRI, or a PIO may purchase real estate from an NRI in India (Person of Indian Origin).
• Only an individual who resides in India and is of Indian descent may purchase an NRI’s agricultural land, plantation property, or farm home.
• An NRI may also mortgage the transfer of his or her real estate in India to a licenced dealer or home financing company.
• An NRI should refrain from mortgaging their home and commercial property in India to a third party located outside of India. The RBI’s prior consent is needed for this purpose.
Property Documents Required:
A Non-Resident Indian (NRI) must provide roughly the same amount of papers as an Indian who wants to sell real estate in India, however the former must arrange a few extras beforehand. These are the documents:
1. Passport: An NRI who wants to sell real estate in India needs be in possession of a passport, albeit it need not be an Indian passport. This will function as the transaction’s participant’s identification evidence. A passport fulfils the same function for both Persons of Indian Origin (PIO) and Overseas Citizens of India (OCI).
2. PAN Card: As their income is taxable where they live, many NRIs do not pay taxes in India. Nonetheless, experts advise NRIs to apply for a PAN (Permanent Account Number) card here if they want to purchase real estate in India because they will need it to submit an application for a tax exemption certificate once the property has been sold. NRIs having a foreign communication address are issued PAN numbers in a few nations.
3. Tax Returns: The transaction becomes taxable if an NRI has owned a property for a predetermined amount of time and has made money from it (by renting it out, for example). Tax returns for the whole time you owned the property should also be maintained on hand in such situation.
4. Address Proof: An NRI must provide documentation to substantiate both his domestic and foreign addresses. A ration card, phone or energy bills, life insurance policy statements, etc. may fall within this category. The same set of documents are needed to prove your living overseas.
5. Sale Deed: The selling deed, which serves as the primary proof of ownership, is a crucial document required in the procedure. An agreement signed by an NRI while acquiring a property that is still under construction in India is known as a sale deed.
6. Allotment Letter: The property is given to the person who possesses it by a letter of allotment (from a society, a builder, or any other pertinent body).
7. Documents From The Society: A letter from the apartment or society is required for approval of the sale procedure for an apartment in a certain society. According to this document, the vendor has paid the society in full. To prove ownership of the property, a copy of the society member’s membership is also necessary.
8. Approved Building Plan & Occupation Certificate: While a copy of an authorised construction plan is required when selling a property, the builder or the building society may also issue an occupation certificate as confirmation that the apartment has been inhabited.
9. Encumbrance Certificate: To guarantee the buyer that the land or the property is free of any outstanding debts to governmental entities, an encumbrance certificate is required. This is crucial whether it’s a house, an apartment, or even a piece of land.
In addition to these records, it would be beneficial if an NRI could also supply records of their historical property tax revenues. A cautious buyer could request it.
Authored By: Adv. Anant Sharma, Vikrant Rathore & Lehar Saini
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