Selling property in India as an NRI: the compliance sequence

Before the sale

Confirm your residential status for the year of sale, since it determines how the transaction is treated. Gather the original purchase documents and records of any improvement costs, because these are needed to work out the capital gain.

Tax deducted by the buyer

When the seller is a non-resident, the buyer is generally required to deduct tax at source (TDS) from the payment and deposit it with the government.

Because the deduction is often calculated on a basis that exceeds the seller's eventual tax liability, the law provides a route to apply to the tax department for a certificate permitting deduction at a lower amount. This needs to be planned before the sale completes.

Working out the capital gain

The gain is broadly the sale price less the cost of acquisition and eligible expenses. How it is taxed depends on how long the property was held and on the law in force for that year.

Reliefs may be available where the gain is reinvested in specified ways. The conditions are detailed and time-bound, so they should be considered before the proceeds are used.

Filing a return and repatriating funds

The sale is reported in your Indian income tax return for the year, where the tax deducted is credited against the final liability and any excess can be claimed as a refund.

Moving the proceeds abroad is governed by foreign exchange regulations and requires supporting documentation, which your bank will ask for.

Tax in your country of residence

The sale may also need to be reported where you live. A Double Taxation Avoidance Agreement between India and that country may provide relief so the same gain is not taxed twice.

This article is a general overview. Property transactions turn on their specific facts, and you should take professional advice before proceeding.