I’m a non-resident Indian (NRI) living in Germany and have inherited a piece of non-agricultural land in India. I am going to sell it soon. Can I repatriate the sale proceeds?
An NRI may remit an amount up to $1 million per financial year (i.e., 1 April to 31 March), out of the balances held in her Non-Resident Ordinary (NRO) rupee account, including sale proceeds of assets (inclusive of assets acquired by way of inheritance or settlement), for all bona fide purposes, subject to payment of applicable taxes in India, if any.
So you can remit the sale proceeds from sale of non-agricultural land subject to satisfaction of following conditions:
(a) income-tax, if any, has been deposited
(b) documentary evidence of inheritance is provided.
Further, any gain arising from the sale of property is taxable in the year of transfer and is subject to capital gains tax.
Depending on the period of holding of the property, capital gain will be considered as either: long-term capital gain (LTCG), if period of holding is more than 36 months; or short-term capital gain (STCG), if period of holding is 36 months or less.
As you had inherited the property, the period of holding of the previous owner would also be taken into consideration.
The cost of acquisition will be the cost incurred by the previous owner to acquire the property.
In case of LTCG, the difference between the sale price and indexed cost of acquisition will be taxable as LTCG at the flat tax rate of 20% (plus applicable surcharge and education cess). LTCG can be claimed as exempt from tax to the extent that it is re-invested in India in another residential property or specified bonds, subject to certain specified conditions.
If due to some reason the capital gains remain uninvested till 31 July—the due date for filing of tax returns in India—then the amount of capital gains could be deposited in a capital gains account scheme with a bank (not later than the due date of filing your tax return in India) and subsequently withdrawn for specified reinvestment.
In case of STCG, the difference between the sale price and cost of acquisition will be taxable at applicable slab rates (plus the applicable surcharge and education cess).
Any loss on the sale of property can be carried forward up to eight years from the year of sale by filing a tax return and be offset against long-term or short-term capital gains.