NRI home buyer? Tips on repatriation of funds post realty sale
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Are you a Non-resident Indian who has invested in Indian real estate market expecting a good return? Then you should understand the pros and cons of repatriating the money back to your country without any hassles.
Remember, the planning should be done before you decide to make the purchase rather than during the sale of the asset. We have listed down some important aspects an NRI home buyer should be familiar with.
Repatriation of the Principal Amount invested
Funds held in any overseas account and brought in India via bank transfer to make payment for the purchase is one aspect of ‘principal amount’. Another is through funds already parked in his NRE (Non-resident external) account, which, via drawing to a cheque can be paid to the seller and will be considered in the principal amount. This principal invested can be repatriated back to his foreign country in the foreign currency without any restrictions and permission from RBI. This also does not have any upper cap on the amount. However, this is applicable for a maximum number of 2 residential properties plus an unlimited number of commercial properties in the lifetime of the NRI investor.
Restriction
From the 3rd property onwards, even this principal portion has to be deposited in an NRO (Non Resident Ordinary) account of the NRI, of which a maximum of USD 1 Million (approx Rs.6 crore) can be repatriated for every financial year to the overseas bank account.
Property bought wholly with funds in Indian NRO account
The entire proceeds from the sale of the property including principal and profits must first be deposited in an NRO account and then a maximum amount of USD 1 Million can be repatriated per financial year.
Some funds lying in NRO account and fresh foreign currency remitted from abroad or from balances existing in NRE/FCNR accounts
The respective rules explained above apply in proportion of funds invested; which means that the principal invested out of the NRO account can be repatriated only to the extent of USD 1 Million per annum and the principal invested from external sources or NRE/FCNR funds can be repatriated fully without any limit at one go but subject to the restriction on number of residential properties.
A qualified chartered accountant should certify the amounts invested in the property purchase, which can be corroborated with the bank statement reflecting those transactions. Understand the taxation matters with regards to short term & long term capital gain from your CA before deciding when to sell the asset to ensure maximum return on the investment. Taxation laws of the foreign country on the amount invested in India also need to be carefully considered.
