Yes, you can sell property in India and repatriate the funds to the USA, subject to Indian tax laws and FEMA regulations. NRIs/OCIs can generally repatriate up to USD 1 million per financial year from an NRO account after paying applicable taxes and obtaining a Chartered Accountant (CA) certificate.
The Reserve Bank of India (RBI) governs such transactions through the FEMA (Foreign Exchange Management Act). NRIs can repatriate up to $1 million per financial year from India, including proceeds from the sale of property.
Non-resident Indians (NRIs) can repatriate a maximum of $250,000 without stringent formalities on money transfers from India to the USA. As per Section 206C(1G) of the Income Tax Act, there is no applicable TCS when NRIs transfer money from their NRO to their NRE account.
Selling property bought as an NRI
If you have: Purchased the property with foreign currency or using your Non-Resident External (NRE)/Foreign Currency Non-Resident (FCNR (B)) accounts you can repatriate the entire sale proceeds of the immovable property.
You'll need to report the sale on your US tax return even if you've already paid taxes in India, but you typically won't pay tax on the same income twice. Instead, you can use the Foreign Tax Credit to claim a credit for the Indian capital gains tax you paid.
Just like resident Indians, NRIs selling property in India can avail tax exemptions on LTCG as per Section 54, IT Act 1961. To qualify, you must reinvest the sale proceeds in another residential property in India, specific government bonds with certain characteristics or other assets, within a specific timeframe.
Obtain a Tax Residency Certificate (TRC)
For instance, if you are a tax resident of the US, you can claim relief in India under the India-US DTAA subject to obtaining a Tax Residency Certificate (TRC) from the US revenue authorities, electronically filed declaration in Form 10F, etc.
Firstly, you need to purchase a new property either one year before or two years after selling your existing property. Alternatively, you can construct a new property within three years of selling your previous one. The entire sale proceeds must be reinvested to avail full exemption.
The "36-month rule" for capital gains tax (CGT) primarily refers to the UK's Principal Private Residence (PPR) Relief, where the final 36 months (or 9 months for most) of a property's ownership period are tax-exempt, even if not lived in, provided it was a main home at some point. In the US, the relevant rule for home sales is the "2-out-of-5-year rule" for the Section 121 exclusion, allowing up to $250k/$500k profit tax-free if owned and used as a main home for 2 of the 5 years before sale, with exceptions for unforeseen circumstances.
Maximum marginal rate is the highest rate of tax at any income level. This means for those with incomes between Rs 2 crore and Rs 5 crore, 39% will be the highest applicable tax rate, and for those with incomes above Rs 5 crore, it will be 42.74% — the highest tax rate since 1992.
You can send money directly from your bank account in India to the recipient's bank account in the USA. Most Indian banks (like State Bank of India, ICICI Bank, HDFC Bank, etc.) offer wire transfer services. This can be done either online or by visiting the branch.
You can generally transfer large sums from overseas to the U.S. without paying income tax if the money is a gift, inheritance, or personal transfer, but you must report amounts over $10,000 to FinCEN (via your bank) and potentially file IRS Form 3520 for foreign gifts over $100,000 (from individuals) or around $19,570 (from foreign entities in 2024) to avoid penalties, as the IRS tracks large inflows for anti-money laundering and tax compliance, even if the money itself isn't immediately taxed as income.
But Form15CB won't need to be filed when a single remittance is less than 50,000 rupees, and the total remittance in the year is not more than 250,000 rupees. In this case, the individual only has to file Form 15CA.
If the property is held for more than 24 months, the profit is considered Long-Term Capital Gain (LTCG). It is taxed at 20% with the benefit of indexation, which adjusts the purchase price for inflation and reduces the taxable amount.
You must live in the property as your main home for part of the time you own it. The last nine months of ownership are automatically exempt even if you move out.
What Are the Legal Ways to Reduce or Avoid CGT?
Long-Term Capital Gains tax rate is 12.5% and Short-Term Capital Gains tax rate is 20% or at slab rates as updated in Budget 2024. Profit on sale of capital assets such as land, building and stocks are subject to capital gains tax. Long Term Capital Gains of listed equity shares are exempt up to Rs.1.25 lakhs.
The beneficiary claiming the discount must be an Australian resident for tax purposes. The trust must have held the asset for at least 12 months before the CGT event occurs.
To avoid being taxed twice on the same income, there are two main IRS forms that expats tend to use: Form 1116 and Form 2555. Form 1116 is for the Foreign Tax Credit. This form helps you claim a credit for the foreign income taxes you already paid.
Yes, if you are a U.S. citizen or a resident alien living outside the United States, your worldwide income is subject to U.S. income tax, regardless of where you live. However, you may qualify for certain foreign earned income exclusions and/or foreign income tax credits.
Expatriates working in India are subject to the country's taxation laws, which can be intricate due to varying factors such as residential status, income sources, and international agreements. Understanding these nuances is essential for expats to ensure compliance and optimise their tax liabilities.