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NRI Guide: Repatriation of funds post realty sale in India

Selling a property in India and taking money out of India is a grey area for many non resident Indians. Here is how you can do it in a compliant manner.

Sukanya Kumar

“An investment in knowledge pays the best interest.” –Benjamin Franklin

Being in control of your money is a great stress reliever. For Non-resident Indians who invest in India in properties, with expectation of getting a good return, should understand the pro-s and cons of repatriating the money back to their country without any hassles.

The planning should be done from the day of deciding to make the purchase and not during the sale of the asset. Following are a few important aspects an NRI buyer should know.

Repatriation of the Principal Amount invested while purchasing the property:

1. Funds brought into India through banking channels: Funds held in any overseas account and brought in India via bank transfer to make payment for the purchase is one aspect of 'principal amount'. Another could be through funds already parked in his NRE (Non-resident external) account, which, via drawing to a cheque can be paid to the seller and will be considered in the principal amount. This principal invested can be repatriated back to his foreign country in the foreign currency without any restrictions and permission from RBI. This also does not have any upper cap on the amount. However, this is applicable for a maximum number of 2 residential properties plus an unlimited number of commercial properties in the lifetime of the NRI buyer.

Restriction: From the 3rd property onwards, even this principal portion has to be deposited in an NRO(Non Resident Ordinary) account of the NRI, from which a maximum of USD 1 Million (approx Rs.6 crores) can be repatriated per financial year to the overseas bank account.

2. Property is purchased entirely with funds lying in NRO account in India: the complete sale proceeds(both principal and profits) must first be deposited in an NRO account and then a maximum amount of USD 1 Mn can be repatriated out of that sum, per financial year.

3. It's a combination of 1 and 2, i.e., some funds lying in NRO account and fresh foreign currency remitted from abroad or from balances existing in NRE/FCNR accounts: then the respective rules explained above apply in proportion of funds invested. It means, the principal invested out of the NRO account can be repatriated only to the extent of USD 1 Mn per annum and the principal invested from external sources or NRE/FCNR funds can be repatriated completely without any limit at one go initially(but subject to same restriction on number of residential properties as explained earlier).

A qualified chartered accountant needs to certify the amounts initially invested in the property during purchase, which can be substantiated with the bank statement reflecting those transactions.

The Short and Long term capital gains tax matter also need to be understood from your chartered accountant and then only an NRI investor can decide a crucial thing- when to sell the property and save maximum.

Indian Income taxes applicable are also to be noted. Taxation in the foreign country on the amount invested in India also requires special notation.

If the property is rented out in India or in some cases lying vacant, the applicable tax laws are different in India too.

My next article will have more detail on what to lookout for while making the initial purchase. 

Hope this clears some doubts about the repatriation of funds post property-sales.

“It is the absence of facts that frightens people: the gap you open, into which they pour their fears, fantasies, desires.” - Hilary Mantel, (Author of prize-winning book Wolf Hall)
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