How Can I Repatriate Funds from the Sale of Property as an NRI?

For Non-Resident Indians (NRIs), owning property in India is not just an emotional connection to their homeland but also a lucrative investment. However, when it comes to selling the property, many NRIs are uncertain about how to repatriate the proceeds back to their country of residence. Repatriation refers to transferring the funds earned from the sale of property in India to a foreign country, and it is a process that requires adherence to specific guidelines set by the Reserve Bank of India (RBI) and other regulatory bodies.

In this blog, we will guide you through the process of repatriating funds from the sale of property in India, key regulations, and the documents you need to ensure a smooth transaction.

1. What is Repatriation of Funds?

Repatriation refers to the process of transferring money from one country to another. For NRIs, repatriating funds involves moving the proceeds from the sale of property in India to their country of residence. While NRIs can legally repatriate the funds, it is subject to certain conditions set by the Indian government and the Reserve Bank of India (RBI).

2. Conditions for Repatriating Funds from the Sale of Property

NRIs can repatriate funds earned from the sale of property in India under certain conditions. These include:

a) Eligibility to Own Property in India

NRIs must ensure that the property they sell is legally owned by them and does not fall under any restricted categories such as agricultural land, plantation property, or farmhouses. NRIs are not allowed to buy or sell agricultural land unless they are agriculturists by profession.

b) The Property Was Purchased Using Foreign Funds

For repatriation of funds from property sale, the property must have been purchased using foreign funds (in foreign currency). This ensures that the sale proceeds can be repatriated to the foreign country. If the property was purchased using Indian funds (through an NRO account, for example), the funds are subject to certain restrictions.

c) Repatriation Limit

The repatriation limit for funds from the sale of property is USD 1 million per financial year (April to March). This amount includes funds from the sale of property and other income sources like investments. If the NRI is selling multiple properties, the cumulative amount repatriated cannot exceed this limit in a single financial year.

d) Payment of Taxes

Before repatriating funds, NRIs must ensure that all taxes have been paid on the sale of property. This includes capital gains tax, which is applied based on whether the property is sold as a short-term or long-term asset.

• Short-Term Capital Gains Tax (STCG): If the property is sold within two years of purchase, the profit is considered short-term and taxed at a rate of 30%.
• Long-Term Capital Gains Tax (LTCG): If the property is held for more than two years, the profit is considered long-term, and the tax is applied at 20% with indexation benefits.

The NRI must submit proof of tax payment to the bank before initiating the repatriation process.

3. Repatriation Process: Step-by-Step

To repatriate funds from the sale of property in India, follow this step-by-step guide:

Step 1: Sell the Property

Complete the sale of the property through the required legal channels. Ensure that the sale proceeds are deposited into your NRE (Non-Resident External) or FCNR (Foreign Currency Non-Resident) account, as these accounts allow repatriation of funds without restrictions.

Step 2: Pay Taxes on the Sale

Before repatriating funds, you must ensure that any taxes, including capital gains tax, are paid on the property sale. Obtain a tax clearance certificate or proof of tax payment from the Indian authorities.

Step 3: Transfer the Sale Proceeds to an NRE or FCNR Account

To repatriate funds, the sale proceeds must be transferred to your NRE (Non-Resident External) account or FCNR (Foreign Currency Non-Resident) account. Both these accounts are designed for NRIs to park their foreign income in India and also allow easy repatriation.

• NRE Account: This is used to deposit earnings from foreign sources. Funds in this account are freely repatriable to the country of residence without restrictions.
• FCNR Account: This is a fixed deposit account in foreign currency. The principal and interest in an FCNR account are also freely repatriable, but the currency must be the same as the account’s denomination.

Step 4: Request the Bank for Repatriation

Once the funds are in your NRE or FCNR account, you can request your bank to transfer the funds to your foreign bank account. The bank will require the following documents:

• Proof of tax payment
• Sale deed or agreement
• A letter to the bank requesting repatriation
• Copy of your passport and visa (if applicable)
• RBI Form 15CA and 15CB (for tax clearance)

The bank will process the request after verifying the documents. Note that repatriation will only be allowed up to the permissible limit of USD 1 million per financial year.

Step 5: Transfer the Funds to Your Foreign Bank Account

Once all the formalities are completed and the bank approves your repatriation request, the funds will be transferred to your foreign bank account. The bank will also provide you with a foreign exchange (forex) certificate.

4. Documents Required for Repatriation

Here’s a list of documents you will need to initiate the repatriation of funds:

1. Sale Deed or Agreement: Proof that the property has been sold.
2. Tax Payment Proof: Evidence of capital gains tax payment on the property sale.
3. RBI Form 15CA & 15CB: These forms are required to declare tax compliance. Form 15CA is filled online, while Form 15CB needs to be signed by a chartered accountant.
4. Passport Copy: A copy of your valid passport as proof of NRI status.
5. Bank Request Letter: A letter to your bank requesting the transfer of funds.
6. Foreign Bank Account Details: Information about your foreign bank account for the transfer.
7. Bank KYC Documents: Know Your Customer (KYC) documents to verify your identity with the Indian bank.

5. Important Considerations Before Repatriation

• Tax Liabilities: Ensure all taxes are paid, including capital gains tax. Failure to do so can result in penalties or delays in repatriation.
• Limit on Repatriation: Keep in mind the annual limit of USD 1 million for repatriation of funds.
• Currency Risk: When transferring large sums of money, currency fluctuations may impact the final amount received in your foreign bank account. Check the exchange rate before initiating the transfer.

6. Conclusion

Repatriating funds from the sale of property as an NRI is a straightforward process if you follow the right steps and comply with the regulations set by the Reserve Bank of India. By transferring the funds to an NRE or FCNR account, ensuring all tax obligations are met, and submitting the necessary documents, you can repatriate the proceeds seamlessly.

If you are unsure about any of the steps or need assistance with documentation, it’s always advisable to consult a financial advisor or tax consultant who can guide you through the repatriation process effectively.

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Disclaimer:

The information provided in this blog is for general informational purposes only and should not be considered legal or financial advice. Repatriation regulations, limits, and tax policies may vary depending on changes in Indian laws. It is always recommended to consult a qualified financial advisor or tax consultant for personalized advice regarding repatriation of funds. The author and the platform are not responsible for any actions taken based on the content of this blog.