Selling Land in India and Moving Money Abroad: What You Need to Know About Taxes

Selling any property is a big decision. The scale of complication is only greater when you have to transfer the funds overseas. Therefore, to avoid any hassles, it is crucial to understand the tax implications. In this article, we will go through the key tax considerations and moving the funds from the sale of property abroad.

Capital Gains Tax: The Basics

Capital Gain is the difference between your purchase price and selling price when you sell for more than you paid to purchase. The purchase price is inclusive of registration fees and any development expenses. You are generally liable for Capital Gains Tax (CGT) on the profit made from the sale.

The CGT rate depends on how long you've owned the land and is generally divided into 2 types. Short-Term and Long-Term Capital Gains.

• Short-Term Capital Gains: If you've owned the land for less than 24 months, you'll be taxed at your income tax slab rate.
• Long-Term Capital Gains: If, however, you've held the land for more than 24 months, then it is considered long-term capital gains and is generally taxed at a lower rate.

Important Note for NRIs: If you are a Non-Resident Indian (NRI) selling land in India, the standard TDS rate on long-term capital gains is 12.5% + Surcharge (10% or 15% of the TDS rate) + Cess (4% of TDS+Surcharge) if the capital gain is above ₹50 lakhs. If the capital gain is lower than ₹50 lakhs then surcharge is exempt. However, you can apply for a Lower/NIL TDS Certificate from the Income Tax Department if your calculated capital gains qualify for a reduced deduction.

TDS Refund: If excess TDS is deducted at the time of sale, you can claim a refund while filing your tax return. The refund will be credited to your Non-Resident Ordinary (NRO) account after tax processing.

Transferring Funds Abroad: FEMA Regulations

India has strict regulations governing foreign exchange transactions under the Foreign Exchange Management Act (FEMA). You need to comply with these rules when transferring money earned from selling land abroad.

Here are some key points to keep in mind:

• Formalities for Remittance: To transfer funds abroad, you'll need Form 15CA (declaration by the remitter) and Form 15CB (certificate by a Chartered Accountant).
• RBI Approval Limits: No separate RBI approval is required for repatriating up to USD 1 million per financial year from your Non-Resident Ordinary (NRO) account.
• Limits on Remittances: There are annual limits on how much foreign currency you can legally transfer out of India.
• Documentation Requirements: You'll need proper documentation, such as the sale agreement, tax clearance certificates, and proof of your foreign bank account.
• Reporting Obligations: You may need to report large transfers to the Reserve Bank of India (RBI).

Seeking Professional Advice

Navigating these tax complexities can be challenging. It's highly recommended that you consult with a qualified tax advisor or chartered accountant specializing in international taxation. They can provide personalized guidance based on your specific situation, help you optimize your tax liability, and ensure compliance with all applicable laws and regulations.

At Taxero, we understand the intricacies of global taxation. We can connect you with experienced professionals who can offer tailored advice for selling land in India as an NRI. Let us guide you through the process and ensure a smooth and stress-free experience.

Note: Above details are meant for generalized situations and shall not be used as a legal basis for any particular situation readers may have. We do provide tax consultations for specific scenarios and can be reached through our contact us form.

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