Key Takeaways Understanding on:- • Tax implication on NRI selling property in India • FEMA implications • Impact of TDS • Application for lower or no withholding of TDS

1. NRI Selling Property in India and Remitting
Money Outside India: Tax Implications and
Procedural Aspects
CA Jugal Gala

2. Research
Credits
Harish Kumar

3. Legends used in the Presentation
AO Assessing Officer
CGDS Capital Gains Deposit Scheme
DTAA Double Taxation Avoidance Agreement
ITA Income Tax Act, 1961
NRE Non-Resident External
NRI Non Resident Indian
NRO Non-Resident Ordinary
PY Previous Year
RBI Reserve Bank of India
TDS Tax Deducted at Source

4. Presentation Schema
Power to Levy Tax
Implications under
DTAA
Applicable Tax Rates
Exemptions Withholding of Tax Form 15CA & 15CB
Relevant
Considerations
Implications under
FEMA
Judicial Precedents

5. Tax Implications

6. Power to Levy Tax on NRI for Transfer of
Immovable Property
NRI means a person resident outside India who is a citizen of India
For example, Mr. T a citizen of India works in Microsoft Corporation, Washington. He is an NRI
Scope of Total Income – Sec 5 of ITA
The total income of any PY for a person who is a NRI includes all income from whatever source derived which
is received or is deemed to be received in India in such year by or on behalf of such person or
accrues or arises or is deemed to accrue or arise to him in India during such year
Income deemed to accrue or arise in India – Sec 9 of ITA
Incomes shall be deemed to accrue or arise in India whether directly or indirectly through or from
Any property in India
Any asset in India
Transfer of a capital asset situated in India
The above-mentioned sections empowers ITA to levy tax on NRI on transfer of
immovable property in India

7. Implication under DTAA
Double Taxation Avoidance Agreement is a mutual agreement between two countries which decides on
the applicable tax on NRIs in case of inter-country transaction
DTAA ensures there is no double taxation for a given transaction
India follows UN convention model of DTAA, whereby it states that gains derived by a resident of a
Contracting State from the transfer of immovable property and situated in the other Contracting
State may be taxed in that other State
Thus, for a non-resident, capital gains arising on sale of immovable property in India shall be taxable in
India as per the tax laws in India

8. Applicable Tax Rates
Particulars STCG LTCG
Period of Holding 2 years or less More than 2 years
Computation Mechanism Same as resident
Transfer expenses Allowed as deduction
Indexation benefit for cost of
acquisition and improvement Not available Available
Tax Slab rates 20%
Exemptions from capital gains* Not available Available
TDS**
Rates in force
Non-availability of PAN – 20% if
applicable rate lower than 20%,
otherwise applicable rate
Rates in force
Non-availability of PAN – 20% if
applicable rate lower than 20%,
otherwise applicable rate
**If the rates prescribed for taxation of capital gains in the DTAA are less than the
20% rate or the slab rate, then tax will be deducted at that rate
*Common forms of exemption are explained in subsequent slide

9. Particulars Section 54 Section 54F Section 54EC
Assessee Individual non-residents Individual non-residents Any non-resident
Assets being sold Residential property
Any asset other than residential
property Any immovable property
Nature Long term Long term Long term
Nature of investment
1 Residential property in
India. assessee shall have
an option to invest in two
residential houses situated in
India if the capital gain does
not exceed 2 crores. This
option can be availed only
once in a lifetime. 1 Residential property in India
NHAI or RECL or other
specified bonds, redeemable
after 5 years
Time period
Purchase within 1 year before
the sale or 2 years after the sale
or construct within 3 years after
the sale
Purchase within 1 year before
the sale or 2 years after the sale
or construct within 3 years after
the sale
Within 6 months from the
date of transfer
Quantum of Exemption
Amount invested or Capital
Gains whichever is less
- If cost of new residential
house >= Net sale consideration
of original asset, entire capital
gains is exempt, otherwise,
- LTCG* Amount invested/ Net
consideration
Investment amount or
exemption, whichever is less,
maximum exemption being
Rs. 50 lakhs
Exemptions

10. Particulars Section 54 Section 54F Section 54EC
Capital Gains
Deposit Scheme
(CGDS)
Investment in CGDS, if purchase or
construction not possible before
return filing due date
Investment in CGDS, if purchase or
construction not possible before return
filing due date Not Available
Additional
Conditions
Return filing is mandatory if before
claiming exemption, the total
income is more than the basic
exemption limit
-Non resident should not owned more
than 1 residential property apart from
property on which exemption is being
claimed
-No new asset shall be purchased within
1 year of transfer or constructed apart
from exemption property within 3 years
of transfer of property
- Return filing is mandatory if before
claiming exemption, the total income is
more than the basic exemption limit
- No loans shall be
acquired against
these bonds or
bonds should not be
converted
- Return filing is
mandatory if before
claiming exemption,
the total income is
more than the basic
exemption limit
Lock-in period 3 years 3 years 5 years
Violation
- Unutilised amount in CGDS
account shall be charged as capital
gains
- New asset shall be considered as
short term capital asset and cost
of acquisition for the purpose of
calculating gains shall be reduced
by exemption claimed earlier
- Unutilised amount in CGDS account
shall be charged as capital gains
- Exemption shall be withdrawn and
charged as LTCG
- STCG shall also be computed on
transfer of new asset
Exemption shall be
withdrawn and charged
as long term capital
gains. If the original
asset is depreciable
asset, then short term
capital gains
Contd..

11. Withholding of Tax – Sec 195 of ITA
As per Sec 195 of ITA, any person responsible for paying to NRI shall deduct income tax
Time of Deduction
At the time of credit or payment whichever is earlier
Certificate of non-deduction or lower withholding of TDS
The NRI who is entitled to receive the sum, shall make an application in Form No. 13 to the Assessing Officer
(AO) for grant of certificate authorising him receive the sum without the deduction of tax
As long as the certificate is effective, person responsible for payment of such sum make payment without
deduction of tax
Where the person responsible for paying any sum to NRI, considers that the whole of such sum would not be
chargeable in the hands of the recipient, he may make an application to an AO for lower withholding of tax
Implication
Entire sale consideration shall be liable for withholding of tax

12. Documents Required for Application
Agreement Binding
the Transaction
Form 26AS of
Recipient
Proof of No
Outstanding
Demand
PAN and TAN of
Parties Involved
Citizenship Proof of
Non-resident
Guideline Valuation
in case Immovable
Property is Involved
Passports
Details of
investment for
exemption
Bank Statements
and Details of Loan,
if any
Power of Attorney,
if Authorised
Representative
In practice, following documents and clarifications may be requested by the AO to substantiate the application
for no or lower withholding of tax

13. Form 15CA & Form 15CB

14. Upon receipt of money, if NRI intends to transfer the money outside India (from NRO to NRE
account)
Form 15CA-15CB needs to be furnished to the authorised dealer bank
To confirm that amount received is already been subject to withholding of tax
Form 15CA
Assessee (the remitter) has to submit form 15CA mandatorily
Authorised Dealer need form 15CA before effecting the remittance outside
India
Form 15CB
An Accountant must certify the correctness of details present in Part C of Form 15CA
i.e. tax if any is duly deducted on the proceeds involved
Before filing Form 15CA, Form 15CB duly certified by an Accountant, must be filed
Overview

15. Parts of Form 15CA
Form
15CA
Part A
If remittance is
chargeable to tax and
the payment or
aggregate of such
payments during the
financial year (“FY”) is =<
Rs. 5 lakhs
Part B
If remittance is
chargeable to tax and
payment or aggregate
of such payments
during the FY is > Rs. 5
lakhs and a lower/no
withholding certificate
has been issued
Part C
If remittance is
chargeable to tax and
payment or aggregate
of such payments
during the FY is > Rs. 5
lakhs and a certificate
in Form 15CB has been
obtained
Part D
If remittance
is not
chargeable to
tax

16. Contents of Form 15CA
Details of Remitter Details of Remittee Details of Remittance
Bank details of the
Remitter
1. Name
2. PAN (if available)
3. TAN (if available)
4. Address, email,
phone number
5. Principal place of
business and ward
details (For Part C)
6. Status (Company/
Firm/ Individual, etc.)
7. Residential status
1. Name
2. PAN (if available)
3. Address, email,
phone number
4. Status (For Part C)
4. Principal place of
business (For Part C)
4. Country of Remittee
1.Amount payable before
TDS in Indian currency &
in foreign currency (For
Part B & C)
2.Aggregate amount of
remittances (including
proposed) during the FY
3.Proposed Date of
remittance
4.Nature of remittance
5.Purpose code as per RBI
6.Amount and rate of TDS
7.Date of deduction
1.Name and
branch of
the bank
2.BSR code
of the bank
(only for
Part B & C)

17. Contents of Form 15CB
1. Name and
2. Address of
beneficiary
of
remittance
1.Country to which remittance is made and
its Currency
2.Amount payable in foreign and Indian
currency
3.Proposed date of Remittance
4. Nature of remittance as per agreement /
document
5. Grossed up remittance (explained in
example later)
6.Amount of TDS in foreign and Indian
currency
7.Rate of TDS as per Income Tax Act or as
per DTAA
8.Actual amount of remittance after TDS in
foreign currency
9.Date of deduction of tax at source
1.Name and branch
of the bank
2.BSR code of the
bank

18. Contd..
Details of Taxability as per Income Tax Act Details of Applicability of DTAA
1.Taxability under the provisions of Income
tax Act (without considering DTAA)
2.Is remittance is chargeable to tax
If yes,
(a) the relevant section of the Act under
which the remittance is covered
(b) the amount of income chargeable to tax
(c) the tax liability
(d) basis of determining taxable income and
tax liability
If no – reasons
1.If income is chargeable to tax in India and
any relief is claimed under DTAA
2. If yes, whether Tax Residency Certificate
(“TRC”) is obtained from the recipient of
remittance
3.Relevant DTAA and corresponding article
4.Taxable income as per DTAA and tax
liability as per DTAA in Indian Rs.
5. Nature of remittance (explained in next
slide)

19. Relevant Considerations
Buyer needs to obtain Tax Deduction Account Number (“TAN”) before deducting TDS
TDS return needs to be filed by the buyer
If the payment is made to a non-resident outside India, then compliance of 15CA-15CB needs to be
done by the buyer as well
Thus, for a non-resident, capital gains arising on sale of immovable property in India shall be taxable in
India as per the tax laws in India

20. Implications under FEMA

21. Transfer of Immovable Property
To a person resident in India – any immovable property
To a person resident outside India - any immovable property
other than agricultural land or plantation property or farm house
An NRI may transfer

22. The RBI regulation prescribes prohibition for citizens of certain countries from transferring of immovable
properties in India. The prohibited citizens of certain countries are
Pakistan Bangladesh Sri Lanka Afghanistan China Iran
Nepal Bhutan Macau Hong Kong
Democratic People’s
Republic of Korea
The above-mentioned citizens cannot without prior permission of RBI transfer immovable property in India
However, they are allowed to lease an immovable property in India not exceeding 5 years
It shall be noted that citizens shall include natural persons and legal entities
Prohibited Persons

23. Conditions
The immovable property was acquired by the seller in accordance with the provisions of the foreign
exchange law in force at the time of acquisition by him
The amount for acquisition of the immovable property was paid in foreign exchange received through
banking channels or out of funds held in Foreign Currency Non-Resident Account or in Non-Resident
External Account
The repatriation of sale proceeds for a residential property is restricted only for 2 such properties
Consideration for any transfer of immovable property cannot be made by traveler’s cheque or by foreign
currency notes or by any other mode other than those specifically permitted by RBI
Repatriation of Sale Proceeds of
Immovable Property

24. Judicial Precedents

25. Relevant Case Laws
Where assessee purchased a property jointly owned by co-owners, in view of fact that one of co-owners of
property was a non-resident, assessee was required to deduct tax at source under section 195 to extent sale-
consideration was paid to said co-owner – R. Prakash vs. Income-tax Officer, International Taxation, Ward-
2(1), Bangalore [2013] 38 taxmann.com 123 (Bangalore Tribunal)
Where seller of Indian property was NRI according to address given in sale deed, assessee-purchaser ought
to have made TDS under section 195 on sale consideration payable to NRI seller, failing which he was to be
treated as assessee-in-default under section 201(1). If NRI purchaser fails to take recourse to section 195(2),
he would be required under section 195(1) to deduct tax on entire sale consideration payable to NRI seller
and not only on capital gain arising on transaction – Syed Aslam Hashmi vs. Income-tax Officer,
(International Taxation), Ward 2(1), Bangalore [2012] 26 taxmann.com 6 (Bangalore Tribunal)

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