As Non-Resident Indians (NRIs) look to monetise their real estate holdings in India, selling a property can appear to be a straightforward transaction. However, unlike the resident sellers, NRIs face more challenges through the distance, legalities, taxation, and even compliance rules before they make a sale. Understanding the different aspects of such sales can help sellers to avoid penalties, delays, and even fraud.
Verify Ownership And Property Documents
Before one lists their property on the market through a broker or any app, NRIs should make sure that all the ownership documents are present and in order. This includes the sale deed, title documents, property tax receipts, occupancy certificates, and society clearances wherever applicable. Any difference in the ownership documents or any pending legal disputes can delay the process of the sale and also impact the market value of the property.
“Firstly, the property must have updated documentation with proper title deeds, encumbrance certificate, tax receipt, approved plan, and other necessary documents. Lack of proper documentation might pose problems when carrying out the transactions and affect the saleability of the property,” says E. Lakshminarayana Reddy, founder and CEO, EARA group.
Understand Tax Deducted At Source Rules
One of the most important considerations for NRIs is the higher Tax Deducted at Source (TDS) applicable on property sales. Unlike resident Indians, where buyers deduct one per cent TDS, buyers of NRI-owned properties are required to deduct TDS at rates that range from 12.5 per cent to over 20 per cent. This depends on whether the gains are classified as long-term or short-term. Since the tax liability may be lower than the amount deducted, NRIs can apply for a lower or no TDS certificate from the Income Tax Department to avoid this charge.
“Taxation is an important consideration that NRIs should be well-informed about before signing any sales agreements. It is always wise for NRIs to plan their taxes in such a way that they pay all required taxes to avoid legal troubles, and seek expert advice on Tax Deduction at Source (TDS),” adds Reddy.
Repatriation Of Sale Proceeds
NRIs intending to transfer the sale proceeds abroad should understand the formalities and water-tight regulations set down by the Reserve Bank of India (RBI). Funds can generally be returned within specified limits and documentation requirements, which include proof of taxes paid. The funds are usually credited to an NRO (Non-Resident Ordinary) account before they are transferred to the actual owner.
Use Power Of Attorney Carefully
One traditional way NRIs sell a property in India is by appointing a trusted family member or representative by issuing a Power of Attorney (PoA). The one who is given this responsibility manages the sale, including who to sell, notarisation, and, whenever required, attestation by the Indian Embassy or Consulate in the country of residence. If the PoA is drafted improperly, it can lead to legal complications and delays in registrations.
“Where an NRI resides outside India, it might be easier for the person to execute a power of attorney allowing some trustworthy person to carry out transactions without the need to travel to India frequently. Equally important is partnering with credible real estate advisors and legal experts who can facilitate due diligence, transparent negotiations, and timely execution of the transaction. Professional guidance not only minimises risks but also enhances buyer confidence,” adds Reddy.
Selling a property in India as an NRI requires careful planning beyond just finding a buyer. By understanding taxation, documentation, and compliance requirements, which are the additional responsibilities of an NRI, they can ensure a smoother transaction that maximises their investment value.