Repatriation of the sale proceeds of immovable property

[This article elucidates the FEMA rules for the transfer of sale proceeds of immovable properties abroad and the documents required for the same.]

Section 6(5) in the Foreign Exchange Management Act, 1999 provides that “A person resident outside India may hold, own, transfer or invest in Indian currency, security or any immovable property situated in India if such currency, security or property was acquired, held or owned by such person when he was resident in India or inherited from a person who was resident in India”.

The Non-Resident Indians are allowed to repatriate an amount up to US$ one million per financial year (April-March) as per FEMA act, out of the balances held in the NRO account subject to tax compliance. This amount includes sale proceeds of assets acquired by way of inheritance or settlement. There are certain rules and regulations to be followed for repatriation of the sale proceeds of immovable property outside India. The rule varies depending upon the acquisition of property by the seller such as inherited/gifted, purchased property while being a resident Indian, purchased as NRI, etc. The following article covers the governing rules regarding the purchase and sale of property by NRIs and the repatriation of sale proceeds.

Inherited/gifted property is sold:

Repatriation up to USD 1 million per financial year (April to March)is allowed, along with other assets under (Foreign Exchange Management (Remittance of Assets) Regulations, 2016) for NRIs/ PIOs and a foreign citizen (except Nepal/ Bhutan/ PIO) who has (i) inherited from a person referred to in section 6(5) of FEMA, or (ii) retired from employment in India or(c) is a non-resident widow/ widower and has inherited assets from her/ his deceased spouse who was an Indian national resident in India. The sale proceeds to be deposited in the NRO account of the NRI seller.  The balance available in the account may be repatriated outside India up to USD One million per financial year. If remittance increases US dollars by one million in a financial year (April to March), permission from RBI is required. The NRIs can acquire agricultural land in India only through inheritance, (not by other means) and the same can be sold only to a resident Indian.

Property bought as a resident Indian is sold:

When an NRI wants to dispose of the property bought before moving abroad that is while you are a resident of India, then sale proceeds must be credited to the NRO account. You are entitled to repatriate up to USD 1 million including all other capital transactions per financial year (April-March), given you have paid all your tax dues.  Repatriation is restricted to the sale of two residential properties only.

It is important to note that an NRI cannot repatriate the money if he has kept the property for less than 10 years. For example, he is selling a property after holding it for 5 years, and then he needs to keep the sale proceeds in NRO account for 5 years. After this 5 year period, he can repatriate.

The Property purchased as NRI:

If the property was purchased using foreign currency funds from an NRE /FCNR account, or remittance of foreign currency through banking channels, the maximum amount of repatriation could be the foreign currency equivalent of the amount paid for the purchase. If the property was purchased using money resources in India (loan from a bank or family friends), the repatriation limit is up to USD 1 million including all other capital transactions per financial year (April-March). In all cases, sale proceeds are credited to the NRO account. Permission from RBI is required if remittance is more than that. Waiting for 10 years to complete repatriation’ doesn’t apply for properties bought by NRIs from their foreign money. Repatriation is restricted to the sale of two residential properties only, with no restriction for commercial properties.

Documents required for repatriation of sale proceeds of properties:

• Certificate from Chartered Accountant – Form 15 CB (this is a kind of certification regarding rates and the right kind of tax paid by a non-resident not being a company). Certain details are required from Form 15CB at the time of filing Form 15CA.
• Certificate from income tax department – Form 15 CA (Form 15CA is a declaration of remitter and is used as a tool for collecting information in respect of payments which are chargeable to tax in the hands of recipient non-resident.)
• Application in AD bank for conversion of Indian Rupees to foreign currency to be remitted (Authorised Dealers/ Banks have to be more vigilant in ensuring that such Forms are received by them before remittance is affected, as the revised Rule 37BB, cast upon them a duty to furnish Form 15CA (received from the remitter) to an income-tax authority for any proceedings under the Income-tax Act.)
• Proof of inheritance in case of sale of inherited property
• Document proving sale

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