Sell Property in India as an NRI: Step by Step Legal Process

This article explains the step by step legal process to sell property NRI, based on Indian laws such as the Foreign Exchange Management Act, 1999 (FEMA), the Income tax Act, 1961, and property registration laws. It uses simple language for general readers and focuses on factual, educational information.

1. Who Is an NRI Under Indian Law?

For property and tax purposes, two definitions are important:

Under FEMA

An NRI is a person resident outside India who is a citizen of India. FEMA regulates foreign exchange and property transactions involving NRIs.

Under the Income-tax Act

Residential status depends on the number of days a person stays in India during a financial year. A person may be an NRI under FEMA but treated differently for tax in certain cases. Therefore, tax residency must be checked separately.

2. Can an NRI Legally Sell Property in India?

Yes. FEMA and related regulations permit an NRI to sell immovable property in India, subject to conditions.

Type of Property Matters

An NRI can sell:

• Residential property (flat, house)

• Commercial property (office, shop)

If the property is agricultural land, plantation property, or farmhouse, FEMA rules are stricter. Such property can generally be transferred only to a person who is a resident citizen of India, not to another NRI.

These rules come from FEMA and regulations issued by the Reserve Bank of India (RBI) governing acquisition and transfer of immovable property in India by persons resident outside India.

3. Step 1: Check Title and Ownership Documents

Before starting the NRI property sale in India, the seller should confirm that the title is clear.

Important documents include:

• Sale deed or conveyance deed in the NRI’s name

• Previous chain of title documents

• Encumbrance certificate

• Property tax receipts

• Possession letter and allotment letter (for flats)

• Society or association documents (if applicable)

If the property was inherited, documents such as a will, probate (where required), or legal heir certificate may be needed.

A clear title reduces the risk of disputes and delays in registration.

4. Step 2: Appointing a Power of Attorney (Optional but Common)

Most NRIs live abroad. Therefore, they often appoint a Power of Attorney (PoA) holder in India to handle the transaction.

Legal Points About PoA

• The PoA must clearly authorize the person to sell the property, sign documents, and receive consideration.

• If executed abroad, the PoA should be:

  • Signed before an Indian Consulate/Embassy official, or

  • Notarized and then adjudicated (stamped) in India as per the Indian Stamp Act and state stamp laws.

• The PoA may need registration in India, depending on state law and the nature of authority.

The Registration Act, 1908 and state stamp laws govern registration and stamping of such documents.

5. Step 3: Agreeing on Sale Terms

The NRI and buyer usually sign an Agreement to Sell before the final sale deed.

This document generally covers:

• Sale price

• Payment schedule

• Time for completion

• Responsibility for taxes and charges

• Handing over possession

Advance money is often paid at this stage. However, the major legal transfer happens through the registered sale deed.

6. Step 4: Understanding TDS on Property Sale by NRI

This is one of the most important parts of how to sell property NRI.

What Is TDS?

Under Section 195 of the Income-tax Act, 1961, any person making a payment to a non-resident that is chargeable to tax in India must deduct tax at source.

When a buyer purchases property from an NRI, the buyer must deduct TDS on the amount payable to the NRI.

TDS Rate

TDS is not a flat 1% (that rule applies to resident sellers under Section 194-IA). For an NRI:

• If the gain is long-term capital gain (LTCG), TDS is generally around 20% (plus surcharge and cess, as applicable).

• If it is short-term capital gain (STCG), TDS may be at higher slab rates.

The buyer must deposit TDS with the government and issue a TDS certificate to the NRI seller.

Lower or Nil TDS Certificate

If the actual tax liability is lower, the NRI can apply to the Income Tax Department for a lower deduction certificate under Section 197. This can reduce cash flow issues.

7. Step 5: Capital Gains Tax for NRI

When an NRI sells property in India, capital gains tax for NRI applies.

Short-Term vs Long-Term

• If the property is held for 24 months or less, the gain is short-term.

• If held for more than 24 months, it is long-term.

Long-Term Capital Gains (LTCG)

LTCG on property is generally taxed at 20% with indexation under the Income-tax Act. Indexation adjusts the purchase cost for inflation.

Exemptions Available

NRIs may claim exemptions, subject to conditions:

• Section 54: Reinvestment in another residential house in India.

• Section 54EC: Investment in specified bonds (such as certain government-backed bonds) within the prescribed time.

These exemptions reduce taxable capital gains if conditions are satisfied.

8. Step 6: Registration of the Sale Deed

The actual transfer happens through a registered sale deed.

Legal Framework

• Registration Act, 1908

• Indian Stamp Act and state stamp laws

The sale deed is signed by:

• The NRI seller or their PoA holder

• The buyer

• Witnesses

It is then registered at the local Sub-Registrar’s Office where the property is located. Stamp duty and registration charges are paid as per state law.

Once registered, legal ownership passes to the buyer.

9. Step 7: Repatriation of Sale Proceeds

Many NRIs want to send the sale money abroad.

Bank Accounts Used

Sale proceeds are usually credited to:

• NRO (Non-Resident Ordinary) account, or

• NRE (Non-Resident External) account, if conditions are met.

FEMA and RBI Rules

Under FEMA and RBI guidelines:

• Repatriation is subject to limits and conditions.

• In many cases, up to a specified amount per financial year can be repatriated from an NRO account, subject to taxes being paid.

• Banks may require documents such as:

  • Sale deed

  • Proof of tax payment

  • Chartered accountant’s certificate in prescribed forms

The bank ensures compliance with foreign exchange regulations before allowing remittance abroad.

10. Special Situations

Property Acquired by Inheritance

If an NRI inherited property from a person resident in India:

• FEMA permits sale of such property.

• Repatriation of sale proceeds is allowed subject to conditions and limits.

Joint Ownership

If property is jointly owned with a resident or another NRI, each owner’s tax and FEMA position must be considered separately.

11. Practical Tips When You Sell Property as an NRI

• Keep your PAN (Permanent Account Number) active. It is required for tax compliance.

• Maintain records of purchase cost, improvements, and expenses. These help in computing capital gains.

• Check whether society dues, property tax, and utility bills are cleared.

• Plan TDS and capital gains tax early to avoid surprises.

• Ensure the PoA is drafted clearly if you are not present in India.

These steps make the NRI property sale in India smoother and reduce legal risk.

12. Key Legal References

This process is shaped by several Indian laws:

• Foreign Exchange Management Act, 1999 (FEMA) – governs property transactions involving NRIs.

• RBI regulations on acquisition and transfer of immovable property in India by persons resident outside India.

• Income-tax Act, 1961 – capital gains tax, TDS under Section 195, exemptions under Sections 54 and 54EC.

• Registration Act, 1908 – registration of sale deeds.

• Indian Stamp Act and state stamp laws – stamp duty and stamping of documents.

FAQs: Selling Property in India as an NRI

1. Can an NRI sell property in India without coming to India?

Yes. An NRI can use a properly executed Power of Attorney to complete the transaction in India.

2. Is TDS mandatory when a buyer purchases from an NRI?

Yes. Under Section 195 of the Income-tax Act, the buyer must deduct TDS on payments to an NRI seller.

3. How is capital gains tax for NRI calculated?

It depends on the holding period and indexed cost. Long-term gains are generally taxed at 20% with indexation, subject to exemptions.

4. Can an NRI claim exemption by buying another house in India?

Yes, under Section 54, if conditions about reinvestment and timelines are met.

5. Can sale proceeds be sent abroad?

Yes, repatriation is allowed under FEMA and RBI rules, subject to limits, documentation, and tax compliance.

6. Does the buyer or seller pay stamp duty?

Stamp duty is usually paid by the buyer, as per state practice, but parties can agree otherwise in the contract.

7. What if the property is under a housing society?

Society transfer procedures and dues clearance are generally required before or after registration.

To sell property NRI in India, one must follow a structured legal path. FEMA governs who can buy and how money moves across borders. The Income tax Act determines TDS and capital gains tax for NRI sellers. The Registration Act and stamp laws ensure legal transfer of ownership.