The return on real estate investment (ROI) has not been
yielding desired results in many frontline cities in India for the last few
years, and investors, particularly living out of India, who have bought or
inherited properties in their home towns or other prospective cities, are
losing sleep and are treading ways to find alternate investment options.
The first one, which comes to their mind, is how to sell
their property in the sluggish Indian real estate market? With reliability
factor at its lowest ebb in the realty domain and in the absence of dependable
persons in India, these people have no option but to come down to India or
relay on prominent real estate consultancy firms to sell their properties in
India by paying hefty premiums as service charges or brokerage.
There have been reports that NRIs from North America and
Europe are increasingly selling their properties in India for fear of
depreciation in their ROI.
It makes perfect sense to dispose of one’s property if he or
she is not able to manage the same. In India, there is also one fear that
haunts many – that is the chance of forceful occupancy by local goons once they
come to know that the owner is staying elsewhere and there is no local guardian
to look after the property.
This is especially true if the NRIs in question do not visit
India frequently and are not interested to rent out their properties either.
They don’t prefer to burden their near and dear ones with the task of paying
maintenance, property tax or society dues but find it fit to get back the
capital value of their properties, according to Om Ahuja, CEO of Residential
Services, Jones Lang LaSalle India.
There are a lot of procedures and rules involved in selling
NRI properties in India. If one follows these rules strictly, one can make the
deal as smooth as possible and can also remit back the funds to their country
of citizenship.
Capital gain tax
There are long and short-term capital gains that they should
take care of. Like resident Indians, NRIs who sell their purchased property
after three years from the date of purchase, too will have to pay long-term
capital gains tax of 20 per cent. The exact amount can be found out easily as
many sites provide such information or any reputed tax consultant will give
them the exact amount.
For inherited property, the cost and date of purchase as
well as period of holding are taken into consideration. NRI can avoid paying
this tax if he invests the taxable amount back on some other property in India.
If an NRI sells the property before three years since the
date of purchase, he has to pay short-term capital gains tax, which is the
difference between the sale value and the cost of purchase that comes to 30 per
cent.
Repatriation
NRIs and PIOs are generally permitted to take back their
sale proceeds of property from an Indian resident to their country of
residence, subject to certain conditions. If these conditions are met, NRIs
need not have to seek the permission of RBI. However, if the NRI buys a
property from a seller who resides outside India, then it is mandatory for him
to seek specific permission from the RBI.
However, the repatriation funds per financial year should
not exceed $75,000 under the Liberalised Remittance Scheme (LRS scheme) which
should be carried out through authorised dealers. Another important point to
consider is the income tax liability on the amount of gain for NRIs in the
country of their residence, and if both outward and inward taxes eat up their
capital gain, they should better invest the amount back in their country of
origin and keep quite for sometime till the market condition becomes favourable
for such sale procedure.
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