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Tax and Money Transfer Guide For NRIs Who Sold Their Indian Property

Updated on December 06, 2021 10:22 am
House Sale

Selling a property in India that you currently own but will not use should be a pretty straightforward process. However, the tricky part is not 'finding the right buyer' but 'getting the funds transferred to the United States after selling the property in India.

Multiple taxes and lengthy documentation requirements for anyone looking to sell their house in India and transfer their funds to the US can be overwhelming.

In this article, we will explain the necessary steps, required documentation, and the tax implications for getting the funds transferred to the US after your property has been sold in India.

Prerequisites For An NRI To Repatriate Money After Selling Your Indian Property

Non-resident Indian (NRI) is a residential status determined by an individual's tax liability. Technically, an NRI status is more a taxation status than a residential status, and a citizenship status does not have an impact.

Who Is An NRI?

An Individual's NRI status is determined based on the period of stay of the taxpayer in India and is computed separately for each year.

  • The person has been in India for less than 182 days in that financial year

OR

  • The person is in India for less than 60 days during that financial year. He has been in India for less than 365 days during four previous years immediately preceding the relevant financial year.

Can An NRI Inherit Immovable Property In India?

Yes. NRIs, PIOs, and foreign nationals of non-Indian origin can inherit immovable property in India.

However, citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, and Bhutan need to get prior approval from the Reserve Bank of India (RBI).

From Whom Can An NRI Inherit Immovable Property?

An NRI can inherit immovable property from another NRI, PIO, or foreign nationals of non-Indian origin.

Can An NRI Sell Their Inherited Property In India?

Mostly yes, but it depends on the type of property.

Residential or commercial property in India that you have inherited or bought can be sold to another NRI, a Person of Indian Origin (PIO), and a resident in India.



Agricultural land, plantation property, or farmhouse acquired by way of inheritance can only be sold to Indian citizens permanently residing in India.

If you are a PIO, you will need prior approval from the Reserve Bank of India.

Can An NRI/PIO Repatriate The Sale Proceeds Of Their Inherited Property?

NRIs and PIOs can repatriate the sale proceeds of the immovable property inherited from a person resident in India.

You must prove through evidence that you did inherit the property along with all the necessary tax clearance certificates from the Income-Tax authority. Keep in mind that the amount should not exceed USD one million per financial year (April-March), according to the RBI guidelines.

Can An NRI/PIO Repatriate The Sale Proceeds Of A Property Received As A Gift?

Yes, keep in mind that if the immovable property was acquired by way of gift, the sale proceeds should be credited to NRO account only.

From the balance in the NRO account, NRI/PIO may remit up to USD one million per financial year (April-March). Provided the remitter has filled all documents required by the RBI and the Income-tax authority. We will discuss the documentation and taxation later in the blog.

Can I Use My NRE/NRO Account To Repatriate The Sale Proceeds Of Immovable Property?

The answer depends on tax status at the time of purchase, as laid out by the RBI under FEMA.

Let's break it down.

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Repatriation Of Sale Proceeds Of A Property Bought As A Resident Of India

If you bought the property when you were a resident of India, the sale proceeds must be credited to your Non-Resident Ordinary (NRO) account. A few conditions are:

  • You can repatriate only up to USD one million, including all other capital transactions per Indian financial year, which is between April and March.
  • You have to prove that you have paid all your tax dues.
  • Repatriation is restricted to the sale of two residential properties only.

You can do this repatriation if you have held the property for at least ten years. If you have kept the property for less than ten years, you can't repatriate the money immediately.

You need to keep the funds in your NRO account until it completes the ten-year period and then transfer.

Let's say you bought the property in 2012 and sell it in 2022. You can freely repatriate your sale proceeds after fulfilling the conditions required by the banks and tax authorities. 

If you had sold the same property in 2021, you would need to keep the sale proceeds in your NRO account till 2022 till you can freely repatriate in 2022.

The conditions are different if you were an NRI at the time of purchase. For instance, waiting for ten years to complete repatriation doesn't apply to sales proceeds of properties bought by NRIs with their foreign money.

Repatriation Of Sale Proceeds Of The Property Bought As A Non-resident Of India

The sale proceeds of the property that you have purchased after you become an NRI can be remitted outside India only after certain conditions are met. The conditions are as follows:

  • Repatriation of sale proceeds of immovable property should not be agricultural land, farmhouse, or plantation property in India.
  • The property was purchased in compliance with the foreign exchange laws or Foreign Exchange Management Act (FEMA) regulations prevalent at the time of the purchase.
  • The repatriation of sale proceeds cannot exceed the amount of foreign exchange remitted by the NRI to India to buy the said property through formal banking channels or out of funds held in a Foreign Currency Non-Resident (FCNR) account.
  • The repatriation of sale proceeds cannot exceed the amount of loan repayment made using foreign inward remittance or debit to Non-Resident External (NRE) or FCNR accounts.
  • The remittance cannot exceed the amount paid through an NRE account at the time of purchase.
  • In the case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties.
  • In all cases, the amount of sale proceeds must be credited to the NRO account, and only up to USD one million per financial year can be repatriated. An NRO account is different from an NRE account.
  • In all cases, repatriation is subject to fulfillment of documentation required by the RBI and tax liabilities required by the Income-tax authority and the Central Board of Direct Taxes (CBDT).

Documents Required To Transfer Sales Proceeds Of A Property In India To The United States

  1. A government-authorized photo ID proof of the sender is required. These documents can be a Passport, valid Voter ID, and Aadhar Card number.
  2. Permanent Account Number (PAN) card of both parties
  3. Copy of the sale document of the property
  4. If the NRI inherited the property, then she/he will have to present a copy of the will or death certificate or a legal heir certificate of the original owner of the property
  5. Tax Residency Certification
  6. Tax Exemption Certificate from the Income Tax Department under section 195 of the Income Tax Act, 1961
  7. Form 15CA, as per the revised Rule 37BB, banks and money transfer companies need to furnish Form 15CA as proof of tax clearance from the tax department under the Income Tax Act.
  8. Form 15CB is a declaration form required to be filed by the remitter. Form 15CB must be signed by a Chartered Accountant. In Form 15CB, the CA, in a way, attests to the details of the payment, tax compliance, and other components of the remittance.
  9. The bank may require additional documents on a case-by-case basis.

Modes Of Funds Transfer To The USA

An NRI can send money from India to the US in many ways as long as they are sent through an Authorized Dealer (AD) that includes banks, money transfer agents, Non-Banking Financial Company, etc approved by the Reserve Bank of India.

RBI's complete list of ADs

However, we recommend sticking to your bank due to the technicalities of repatriation of funds pertaining to the sale of immovable property.

Bank to bank transfers are facilitated through the Society for Worldwide Interbank Financial Telecommunication (SWIFT) network. Essential documents for a bank to bank transfers are:

  1. Sender's bank details (name, address, account number)
  2. Recipient's bank details (name, address, account number)
  3. Swift code or routing number
  4.  to make the transfer.

Details Of The Sender & Receiver Such As:

  1. Name and address
  2. PAN 
  3. Principal place of business
  4. Name of bank and branch
  5. Code of the bank

Upon submission of the documents, the money will be transferred to the beneficiary account. The best Indian banks to send money to the USA from India are :

  • SBI
  • ICICI Bank
  • Axis Bank
  • Kotak Bank
  • PNB
  • HDFC Bank
  • City Union Bank
  • Federal Bank Limited, etc

NRIs and PIOs are allowed to repatriate an amount up to USD one million per financial year subject to mandatory documentation and tax compliance through Authorised Dealers.

Tax Implications On Money Sent To The US From India

Tax Implications In The U.S. For Money Received From India

The funds sent to a US bank account from India are not taxable. However, if the funds exceed the USD 100,000 mark for any financial year, they must be reported to the Internal Revenue Service (IRS) by filling out form 3520.

U.S. persons (and executors of estates of U.S. descendants) file Form 3520 with the IRS to report:

  1. Transactions with foreign trusts
  2. Ownership of foreign trusts
  3. Receipt of large gifts from foreign persons.

If you receive more than $15,000 in 2021 or $16,000 in 2022 as a gift, you must file Form 709 with the IRS. The IRS allows you to receive up to $11.7 million over your lifetime without paying gift tax in the US.

You would also be required to declare your gains or losses on property sale in your US Tax Return under Section D of Form 1040. A declaration does not necessarily mean tax liability.

You can deduct the taxes paid in India since India has a Double Taxation Avoidance Agreement (DTAA) with the United States.

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Tax Implications In India For The Property Sold In India

Tax implications for an NRI are similar to the resident Indian when it comes to funds from the sale of immovable property, except for the Tax Deducted at Source (TDS) provisions.

Tax Deducted At Source (TDS)

When an NRI sells a property, the buyer is liable to deduct TDS at 20 percent if the property was sold after two years from the date of purchase. If the property has been sold before two years from the date of purchase, a TDS of 30 percent shall be applicable.

To reduce the TDS on the Sale of Property, you can file an application using Form 13 with the Income Tax Department to issue a Certificate for Nil or Lower Deduction of TDS.

Capital Gains Tax

When an NRI sells a property in India, they are also liable to capital gains tax. The amount of tax payable depends on whether it's a short-term or a long-term capital gain.

As per the Income Tax Authority, If you sell your property within 36 months or three years of acquiring it, it's considered a short-term capital gain. If you sell it after three years, it's considered to be a long-term capital gain.

The tax rates and tax benefits applicable to the reinvestment of these two types of gains vary. Long-term Capital Gains on the sale of real estate are taxed at 20 percent, plus a cess of 3 percent if the sale fulfills certain conditions.

The tax on short-term capital gains, which refers to the sale of capital assets within three years from the date of purchase, will depend on the income tax slab rate. Based on your annual income, you will pay an applicable short-term capital gain tax.

You can get an exemption or reduce the capital gain tax by purchasing another property to the extent of the total amount or other capital assets such as government bonds to reduce the burden of capital gains tax.

Tax Collected At Source (TCS)

As per the Union Budget 2020, 5 percent Tax Collected at Source (TCS) is applicable on remittance made under LRS for the amount exceeding INR 7 lakh since October 1st, 2020, in a financial year.

In conclusion, repatriation of funds from India to the US is complicated and a lengthy process. If you are an NRI or PIO currently living in the U.S., completing the documentation will be cumbersome.

We recommend working with a chartered accountant and a certified public accountant familiar with the laws of both countries viz. India and the USA laws. 

Competent CAs in India can help you file all the documents listed above, and they can also help you with the mandatory forms required by the IRS.

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The bank launched Money2India, an online remittance service to facilitate money transfers to India from countries like the USA, UK, Canada, Singapore, and UAE at some of the best exchange rates available in the market.Money2India was founded with the aim to cater to Non-resident Indians sending money to India.Upsides:Well-Established Institution: ICICI Bank is a reputable and well-established financial institution, which can instill confidence in customers regarding the security of their funds and transactions.Hassle-free Bank Account Transfer: One of the best options to send money to a quick transfer to an Indian bank account.Competitive Exchange Rates: ICICI Bank offers competitive exchange rates, especially for larger transfer amounts.Accessible to Non-ICICI Customers: Sign-up is open to everybody and not restricted to ICICI Bank customers.Quick Pay Feature: Repeat a transaction in only 3 clicks. Set up recurring transfers or schedule a transfer for the future, minimizing your hassle.Downsides:Complex Transfer Fee Structure: There isn’t a way to estimate your transfer fee until right before you confirm your transfer. Not Ideal for Small Transfers: The less money you transfer, the poorer the exchange rate you get in comparison to if you are sending a large sum of money. WorldRemitWorldRemit is a leading digital money transfer provider that lets you send money to all states and Union territories in India from the U.S.WorldRemit is a low-cost alternative to other high-street bank transfers. It is also one of the fastest ways to send money abroad.Upsides:Multiple Sending Options: Users can choose from various sending options, including bank transfers, cash pickup, mobile money, airtime top-ups, and more. This flexibility allows you to tailor your transfers to the recipient's needs.Lower Transfer Fees: Charges lower transfer fees than other similar money transfer companies.Transparent Fees: It is known for its transparent fee structure, with clear and upfront information about the charges involved in a money transfer.Fee-Free Transfers Offer: The first 3 transfers for new customers are free of cost.Speed: Many transfers are completed within minutes, especially if using services like mobile money or cash pickup. This can be crucial in emergency situations.Downsides:Inconsistent Transfer Fees: Costs include transfer fees and a markup on the exchange rate, and can vary depending on the delivery method you choose - which can get expensive.Transfer Limits: WorldRemit imposes certain transfer limits, which vary depending on the destination country.Limited Delivery Options: All delivery methods are not available in all locations. This can be a drawback for users who prefer a specific delivery method.PlacidPlacid Express was established over two decades ago and offers international payment services to a range of countries in Europe and Asia including India. Placid offers easy and economical cross-border money transfers because of its direct partnerships with a number of banks and financial institutions.Upsides:Competitive Rates: Placid offers competitive exchange rates, which can result in cost savings for users compared to traditional banks.Low Fees: Placid's fees for money transfers are lower than those charged by traditional banks and some other online transfer services, making it a cost-effective choice.Fast Transfers: Many Placid transfers are processed swiftly. For direct bank account transfers, it can take 3 business days. If you pay with a card, the money gets delivered in as little as 10 minutes in some cases.SpotCash! Service: This service allows your recipient to collect the payment in local cash from an agent.Downsides:Fees: The transfer costs for card payments are fairly high.Limited Coverage: Placid may not be available in all countries, so the range of countries you can money is limited.Potential Transfer Delays: A few things could slow down the transaction, like the recipient's bank's processing time or the delays caused by the intermediary bank.Transfer Limits: Placid has limits on the amount of money that can be sent within specific time frames. This can be inconvenient for people or businesses with large transaction needs.User-Friendly Interface: Some people have noted that Placid’s website is not the most user-friendly, especially for those not familiar with online remittances. ConclusionSending money to India from the US doesn't have to be a costly endeavor. With the right approach and using the various options available for cheap money transfers, you can save both time and money when you send money to India from USA.Whether you're supporting your family back in India, making investments, or simply need to transfer funds for any reason, the key is to stay informed, explore your options, and choose the one that best suits your needs.You can make your international money transfers more affordable and efficient by comparing exchange rates and fees and considering digital remittance service providers.To find the best dollar-to-rupee rate, use CompareRemit for real-time USD to INR exchange rates from the best remittance providers to send money to India today!

USD-PHP
How to Get the Best US Dollar to Philippine Peso Exchange Rate?

If you're planning to send money to the Philippines or simply want to know how to maximize the value of your US dollars when converting them to Philippine pesos, understanding the dynamics of the currency exchange market is essential.In this comprehensive guide, we discuss strategies and tips for getting the best US dollar to Philippine peso exchange rate.We'll cover topics like the dollar to Philippine peso rate today, historical trends, and the best ways to send money to the Philippines efficiently.Before we dive into strategies, let's learn the basics of exchange rates.Why Exchange Rate Matter When Sending the US Dollar to the Philippine Peso?The exchange rate is the value of one currency in terms of another currency. In this case, 1 Dollar to Philippine Peso (USD/PHP) represents how many Philippine pesos you can get in exchange for one US dollar.This exchange rate is influenced by various factors including economic conditions, geopolitical events, and even market sentiment to name a few.Since the exchange rate between two currencies is constantly fluctuating, driven by market forces of supply and demand, it is important to send your money when the exchange rate is working in your favor. In other words, you receive a greater amount of pesos for each dollar you exchange.Read more on exchange rates.Dollar to Philippine Peso Rate TodayAs you may already know, exchange rates fluctuate daily due to market forces. You can check the current exchange rate on financial news websites, currency converter apps, or by contacting your local bank.Keep in mind that different financial institutions may offer slightly different rates due to fees and commissions.The dollar to Philippine peso exchange rate on 9th September traded at 56.66. Over the last four weeks, USD/PHP lost 0.61%. Over the last 12 months, its price fell by 0.25%.As per Trading Economics' prediction, the US dollar to Philippine Peso is expected to trade at 57.17 by the end of this quarter and at 59.15 in one year.US Dollar to Philippine Peso HistoryReviewing the historical trends of the US Dollar to Philippine Peso (USD to PHP) exchange rate can be a valuable tool for anyone looking to make informed decisions about currency exchange.This historical data provides a window into how the exchange rate has behaved over time, which in turn can help you assess whether the current rate is favorable or not.You can find historical exchange rate data on financial websites and use it to identify patterns and trends.Once you've obtained historical data, take the time to analyze it. Look for trends, anomalies, and any factors that might have influenced rate fluctuations.Armed with this knowledge, you can make more informed decisions about when to exchange your US dollars for Philippine pesos, increasing your chances of getting a favorable rate.Why it is Important to be aware of the Exchange Rate Margins?To avoid paying high money transfer fees, it's important to be aware of the exchange rate margins imposed by banks and money transfer providers.While these entities use the mid-market rate (real exchange rate) when trading amongst themselves, they apply a markup to this rate when offering their services to customers. This markup, known as the exchange rate margin, represents the difference between the mid-market rate and the rate provided to consumers.Banks and money transfer providers generate revenue through this marked-up exchange rate and by charging transfer fees. Even a slight variation in the rate can result in significant costs when sending substantial sums of money.Depending on the chosen money transfer service and the amount of money being sent, these exchange rate margins can vary widely, ranging from as low as 0.01% to as high as 10% or more.To avoid these costs, you should seek providers with competitive exchange rates and transparent fee structures, ultimately ensuring that you get the most value when transferring money.Tips to Get the Best USD to PHP Exchange RateFind out the Real Exchange RatesStart by searching for the mid-market rate on Google or Reuters for the currency pairing you intend to use. Utilize any online currency conversion tool to convert US dollars to Philippine pesos.Understanding the mid-market rate will help you gauge the fairness of the exchange rate offered by your chosen service provider. The closer you are to the mid-market rate, the more funds your recipient will receive.Stay InformedKeep yourself updated with the latest financial news and events that might affect the exchange rate. Economic reports, political developments, and global market trends can all impact the value of the US dollar against the Philippine peso.Stay alert for fluctuations in the USD/PHP exchange rate. One advantage of the weaker PHP against the USD is that you can send more pesos to your family in the Philippines in exchange for your US dollars.Choose the Right TimeTiming is crucial when exchanging currency. While you can't predict market movements with certainty, you can track historical trends to identify periods of relative strength or weakness for the US dollar. Consider exchanging your money during favorable market conditions.Shop AroundExchange rates and fees offered by different banks and currency exchange providers can vary significantly. Don't hesitate to shop around and compare rates to find the best deal. Online currency converters and rate comparison tools such as CompareRemit can be especially helpful.Consider Online TransfersIf you're sending money to the Philippines, consider using online money transfer services. These platforms often offer competitive exchange rates and lower fees compared to traditional banks. Some popular options include Wise, Remitly, Instarem, and PandaRemit.Use Forward ContractsIf you have a specific future date for your currency exchange, consider using a forward contract. This allows you to lock in a favorable exchange rate in advance, protecting your money from future rate fluctuations.Avoid Airport KiosksAirport currency exchange kiosks are notorious for offering unfavorable rates. Try to avoid exchanging money at airports unless it's absolutely necessary.Best Way to Send Money to the PhilippinesSending money to the Philippines can be done through various methods, but choosing the best way involves considering factors like speed, cost, and convenience.Some popular ways to send money to the Philippines are:Bank Transfers: Many banks in the US offer international wire transfers to the Philippines, but they can be expensive due to fees and less competitive exchange rates. They may be ideal if you are sending a large sum of money.Cash Pickup: Money Transfer companies such as Western Union, Moneygram, and Ria offer cash pickups as a delivery option. Cash pickups stand out as the optimal choice during unexpected financial emergencies, ensuring quick access to needed funds. If your recipient prefers cash, consider services that allow for cash pickup at local agents in the Philippines.Online Money Transfer Services: Online money transfer services like Wise, Remitly, and other similar service providers offer competitive rates, lower fees, and fast transfers. They are often the preferred choice for sending money to the Philippines.Mobile wallet: Mobile wallets have become increasingly popular for sending money to the Philippines, with Gcash leading the way as a prime example. The mobile wallet option not only offers speed and ease but often comes with competitive currency exchange rates and low fees, making it a cheap and efficient choice for sending money to the Philippines.Cryptocurrency: Some people use cryptocurrencies like Bitcoin to send money internationally, as it can provide fast and potentially lower-cost transfers. However, this option may not be suitable for everyone due to its volatility and complexity.Frequently Asked QuestionsHow much is 1 dollar to Philippine peso?The exchange rate between the US dollar (USD) and the Philippine peso (PHP) can fluctuate daily based on market conditions. To find the current exchange rates, you can check financial news websites, use currency converter apps, or contact your local bank. As of 9th September, 1 USD equals 56.66 PHP.How to convert PHP to USD?To convert Philippine pesos (PHP) to US dollars (USD), you can visit a currency exchange service, a local bank, or use an online currency converter tool. Simply enter the amount in PHP, and it will provide you with the equivalent in USD.How to send money to the Philippines?There are several ways to send money to the Philippines: bank transfers, money transfer services, mobile wallets, etc. Refer to the blog for the details.What is the cheapest way to send money to the Philippines?The cheapest way to send money to the Philippines can vary depending on factors such as the amount you're sending, the exchange rate offered, and the fees involved.Generally, online money transfer services like Wise often offer competitive rates and lower fees compared to traditional banks and other transfer options. However, it's essential to compare rates and fees to find the cheapest option for your specific needs.How much does it cost to send money to the Philippines?The cost of sending money to the Philippines can vary widely depending on the service provider, the amount being sent, and the method of transfer.Some providers may charge a flat fee, while others may have a percentage-based fee. Additionally, exchange rate margins can impact the overall cost.To find out the exact cost, you should check with the specific service provider you plan to use, as fees and rates can change over time.ConclusionMaximizing the US dollar to Philippine peso currency exchange rates involves knowing how exchange rates work, staying informed, timing your currency exchange carefully, and selecting the right money transfer service. By following these tips and monitoring historical trends, you can enhance the value of your currency conversion.Keep in mind that exchange rates fluctuate, so adjusting your approach to current market conditions is essential. Whether sending money to family or handling international transactions, informed choices can lead to long-term savings.If you're looking for the best USD to PHP today, use CompareRemit to discover top remittance providers and the best dollar-to-Philippine pesos exchange rate!

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