NRIs can sell a property in India as a non-resident, but there are regulations in transferring such funds to foreign countries. Failure to know them might delay or even impede your transfer. When you sell a property in India, it’s income from India and it’s taxed. Transferring the sale proceeds may trigger tax payment in the country of residence, too. Let’s explore NRI property sale proceeds repatriation.

Meaning of Repatriation Of Sale Proceeds

Repatriation of sale proceeds is merely a transfer of money that you earned as a result of selling some property in India to your foreign bank account. The Reserve Bank of India regulates this process under the Foreign Exchange Management Act (FEMA). All repatriation rules for NRIs in India should be observed strictly.

Who Can Repatriate?

NRIs and Persons of Indian Origin (PIOs) are allowed to repatriate the sale proceeds, though not every kind of property is allowed. NRIs/PIOs can repatriate:

• Sale proceeds of property bought using foreign exchange / NRE / FCNR funds (subject to specific RBI rules), and

• Sale proceeds of property bought from rupee income or inherited property, via their NRO account, up to USD 1 million per financial year.

An inherited property is also acceptable, though under certain conditions. As a rule, RBI does not permit free repatriation of sale proceeds of agricultural land, plantation property, or farmhouses in the same way as residential/commercial property. If such property is inherited, limited repatriation may be possible via the USD 1 million NRO route, subject to strict documentation and your authorised dealer bank’s/RBI’s approval.

The USD 1 Million Cap and Its Scope

One of the most important regulations of NRI property sale proceeds repatriation is the USD 1 million annual limit. This limit is imposed on a financial year basis (April to March), on NRI and PIO, and on all Indian property sales, inherited property, or other repatriations of NRO and other balances.  

For property transactions, the scope varies:

• Properties that were originally purchased using NRE/FCNR funds, when resold, the entire sale proceeds can be repatriated without limits. 

• Using an NRO account balance or other Indian income to purchase properties originally requires you to adhere to the repatriation of $1 million per year.

• Sale proceeds from inherited properties must also be repatriated, subject to the $1 million per year limit. 

Are you trying to repatriate more than this limit? A special RBI permission is required. The bank you are dealing with in your transfer, called the authorised dealer, should be content with the origin and completeness of the documents to make the remittance. 

Taxation Before Repatriation

Before any repatriation of sale proceeds,  fulfil these tax steps:

• Calculate capital gains: Establish whether your gain is long-term (more than 24 months) or short-term. Long-term capital gains are taxed at lower rates and are subject to exemptions.

• Pay tax: When you are selling to a resident Indian, the TDS and surcharge, and cess are deducted at 12.5% (on LTCG after 23 July 2024) or 30% (on STCG). NRIs should make sure that the buyer does the TDS filing properly and provides them with the TDS certificate.

• File income tax return (ITR): If TDS is more than your total tax liability or you want to claim exemption in accordance with Section 54, 54EC, or 54F, file an ITR and request a refund.

• Get a CA certificate (Form 15CB): It ensures that your remittance is not against the tax authorities.

• File Form 15CA electronically: This is your statement that the taxes were paid on the sum repatriated. 

Documents Checklist

Here are the most common documents you may need to submit:

NRI Property Sale Proceeds Repatriation Process

The following is a step-wise process on how the NRI property sale proceeds repatriation operates.

1. Sell the property: Proceed with the transaction as stipulated in the Indian laws and get the proceeds sent into your NRO account.

2. Pay/verify taxes: Make sure that the buyer deducts the right amount of TDS. Take their TDS certificate (Form 16A).

3. Obtain required forms: Get CA to certify compliance through Form 15CB. Complete the e-file 15CA through the government online portal.

4. Prepare your application: Gather all the supporting documents according to the checklist above.

5. Go to your approved bank offering NRI services: Make an outward remittance request and attach the documentation. All papers will be checked and scrutinised by the bank. You can also do it online if your bank offers online NRI services. 

6. Bank processes transfer: In case of the documentation and tax adherence, the bank transfers money overseas (up to $ 1 million per financial year).

Typical Timeline

• Document and tax steps - 2 to 6 weeks, with the property and paperwork being complete.

• Bank review and transfer - Continuous 7-15 working days, though it can be faster in clear cases.

Example

Assuming LTCG, your capital gain is ₹1 crore, and you sell a flat at ₹5 crore. The buyer deducts TDS of ₹74.74 lakhs (on the total value of the property), and you will get ₹4.25 crore as net cash. There is a limit to this, and you can transfer up to $ 1 million in value in a year (equivalent to ₹8.87 (approx.) crore as of the end of 2025), so the entire net value can generally be transferred overseas, with compliance and conversion rates.

Inherited Property - What Differs

In the case of inherited properties, the capital from the repatriation of the sale is mostly retained. But you have to present your legal heirs’ documentation, succession certificates, and the title of transfer of the property. Banks can also complete other legal scenarios to verify that you are a legitimate heir before being allowed to be repatriated. It should be noted that the same $ 1m limitation is applicable on an annual basis, and all the taxation and compliance requirements should be fulfilled as in the case of self-purchased assets.

Common Pitfalls & How to Fix Them

Here are some common pitfalls to avoid:

• TDS mismatch by the buyer: Ask for corrections or refer to the assessing officer. 

• Missing purchase records: In the absence of acquisition evidence, the bank can stop the repatriation. So you should collect invoices, sales deeds, and transfer documents.

• Attempting to get credit to NRE: Sale proceeds should be remitted through NRO, then transferred rather than credited directly into.

• Exceed $ 1 million cap: Seek special permission from RBI; otherwise, pay only up to the existing cap.

Conclusion

Selling a property in India while you are living abroad is a complex process. It is important to adhere to strict compliance to complete the NRI property sale proceeds repatriation. Understanding how to repatriate sale proceeds will help you to transfer the funds to an overseas account, where you may need them. Complying with laws in India and also with the laws in the country of residence is important to ensure that you move funds under legal norms. 

FAQs

1. Will I be able to repatriate the amount of the entire sale in case I acquired the property using NRE funds or FCNR funds?

You can freely repatriate up to the original foreign currency amount invested in up to two residential properties purchased with NRE/FCNR funds or foreign inward remittance. Any excess (like capital gains) has to be routed via NRO and will be subject to the USD 1 million per financial year limit.

2. What happens if my sale proceeds are more than USD 1 million during a financial year?

There must be prior consent by the RBI with the help of an authorised bank. 

3. Is it possible to repatriate the sale proceeds of farmhouses or agrarian land?

No. The sale of agricultural land, of a plantation or farmhouse, purchased as a resident, cannot be repatriated.

4. Does the sale proceed repatriation require reinvestment?

The sale proceeds remittance is not obligated to be reinvested.