Other statutory compliances

Procedures on Sale of Immovable Property in India

As per Indian Income Tax laws, any payments made to Non Resident is liable to withholding tax at the rate specified on the total sum to be paid. The withholding tax rate in case of capital asset which is held for more than 36 months is 20% plus applicable surcharge and cess. However, the law provides for the procedure of making an application to the tax authority to restrict the tax deduction only to the portion of gain instead of complete sale value. Hence, it is very important for every Non Resident who sells their Immovable Property in India to following the right steps under the expert advice.

The tax law also has several reinvestment options to reduce the possible tax liability. Hence, once you have identified the buyer and crystallized the selling price, you should ideally follow below steps:

  • If the property was purchase prior to 1.4.1981, a valuation report needs to be obtained from a Government Recognized Valuer. This will be considered as cost of acquisition is such cases.
  • As a next step you should work with your tax advisor to minimize your tax outflow and look at various reinvestment options to reduce the possible tax liability.
  • If you had incurred any cost on improvement of the property, the same needs to be considered while computing capital gains tax and finalizing the computation of Capital Gains Tax.
  • Apply to Tax Authorities for Lower/NIL Tax certificate to restrict the tax deduction only on the gains while receiving the sale consideration from the buyer.
  • Vet the Sale Agreement drafted by the Buyer's Lawyer.
  • Applicable tax to be deducted & paid by the buyer and execute the deal.
  • Consult your Chartered Accountant and obtain necessary certificate from them to repatriate funds to your overseas bank account if you so wish.
  • Ensure to file your tax return for the year declaring your Capital Gains and taxes thereon.

Our team is vastly experienced in advising and assisting Non Residents on this subject from start to end at each step of the execution. In case you need any further information on this, write to our expert on tax@kdpaccountants.com


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