If you're a NRI (Non-Resident Indian), OCI (Overseas Citizen of India) or PIO (Person of Indian Origin) and you own a home in India you may be wondering how to go about selling property in India from the USA.
This guide covers everything you need to know, including the tax implications when you transfer money from India to the USA.
We’ll also introduce Wise as a smart way to arrange low-cost international payments with the mid-market rate.
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If you own a property in India and want to sell it to repatriate funds to the USA you’ll need to make sure you fully understand all the regulations and tax implications involved.
Under Reserve Bank of India (RBI) rules you can sell a property in India to a resident of India, another NRI or an OCI. However, if the property you’re selling is agricultural land, a farmhouse or plantation, you can only sell it to a resident of India¹.
To arrange the sale of a property in India you’ll need a comprehensive set of documents connected to the property itself, as well as your own proof of identity and residence.
Sending the money back to the US following the completion of the same requires more paperwork again — we’ll go through that in just a moment.
If you’re selling a property in India you’ll need legal advice and support to make sure the transaction proceeds smoothly.
Your solicitor will be able to give detailed advice on the paperwork needed to sell your property, which is likely to include:
If you’re not resident in India you’re allowed under RBI rules to repatriate funds from the sale of property, subject to some restrictions. Any properties must have been purchased following FEMA rules, and all local tax obligations must be adhered to.
If you’re selling residential property you’re only able to repatriate the funds from 2 homes, and maximum value limits may apply if you’re repatriating funds from the sale of an inherited property¹.
Prior to transferring funds from India to the US you’ll need to complete Form 15CB, and your bank will ask you to provide proof of the source of the money, such as a copy of the property sale agreement.
As a NRI it may not be convenient to return to India to complete the sale of your property personally. In this case you can arrange a power of attorney through your closest Indian embassy or consulate in the US.
Through this arrangement you can have your chosen representative in India complete all the steps required for the property sale without your presence being required.
When you sell a property in India you’ll need to understand the relevant taxes in both India and in the US if you intend to repatriate the funds. As the US and India have a double taxation agreement in place, you should not need to pay the same taxes on the sale in both countries. Instead you can offset once against the other.
Taking professional tax advice in India is a smart move. You’ll not only be confident that you’re following FEMA rules and paying the correct taxes to stay on the right side of the law, but you may also be able to access deductions and benefits based on your personal situation.
Typically the sale of your property will be subject to tax in India, but there are some potential deductions and exemptions depending on the specifics of the situation².
Under FEMA Section 54 for example, you may be able to access tax deductions if you’ve held the property for a fixed amount of time prior to selling it, and the sale proceeds will be reinvested quickly in a new property in India.
Tax deducted at source (TDS) is usually deducted from the property sale value before the funds are passed to the NRI. However, Section 54 exemptions may apply on a property purchased up to 1 year before the sale of the original home — this means that you may be able to provide proof of reinvestment to avoid TDS. Check with your tax advisor prior to making any plans.
Other potentially relevant tax exemptions are covered in FEMA sections 54F and 54EC.
There’s not usually any US tax implication if you’re sending money from the sale of a property you own in India to the US.
However, depending on the amounts involved you may need to report this transfer using IRS Form 3520. If you’re repatriating funds which you received as a gift, different rules may apply — get professional advice before proceeding.
Wise payments are fast, secure and transparent. You’ll get the real mid-market exchange rate and a low fee every time, and you’ll be able to see an estimated delivery time before you set up your payment. With Wise, right now, 45% of our transfers are instant money transfers.
Make sure you get the best deal available when sending money abroad by setting up a rate-triggered alert with Wise. Simply pick the exchange rate you want to access for your payment, and Wise will let you know when that rate is available, based on changes in the foreign exchange market.
Let’s round up a few common questions and answers related to sending money from a property sale in India back to the US.
The US authorities do not impose a limit on the amount of money you can send from India. However, you may need to report high value payments to the IRS using IRS Form 3520.
a NRI can sell inherited property in India with no special permissions under most circumstances. If you’re selling inherited agricultural land the buyer must be resident in India — and if you’re a PIO selling to another PIO you may need to get RBI authorization prior to proceeding.
If you’re receiving a gift of money from India to the US, you may need to report and pay taxes on this income. Check with the IRS to make sure you’re fulfilling all your legal obligations.
|See how Wise compares with other Indian providers|
Selling a property can be a complex business, especially if you’re not present in the country to oversee everything.
Use this guide to start figuring out the steps you need to take to sell your property in India — and remember to get all the professional advice you need to make sure things go smoothly.
Once your sale has completed and you want to send funds back to the US, choose Wise for your INR — USD payment, to save up to 6x compared to using a regular bank.
Source checked on 01.26.2022
This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from TransferWise Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date.
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