Sale of the Property - Above 1 Cr
Selling a Property In India, even if its above 1 Cr , Can be more complicated than it seems. From confusing tax rules and complex paperwork like Form 15CA/ CB to excessive TDS deductions, the process is full of hidden hurdles.
Dont worry you are not alone
###### **Case Overview**
Seller : Mr. Kamesh, an NRI
Property Sold : Villa in Bangalore
Sale Price : ₹1.2 Crores
Purchase Price (10 years ago) : ₹50 lakh
Indexed Cost of Acquisition : ₹90 lakh
Long-Term Capital Gain (LTCG) : ₹30 lakh
Tax on LTCG (20% : ₹6 lakh
Net Amount Post-Tax : ₹1.14 crore
By the End of this Guide, you'll have clarity on how to Slash your Tax bills using Indexation and exemptions and Strategies to avoid the excess TDS deductions and a Step by step roadmap for Repatriating funds smoothly and a Real-Life example to make a resonated decision making for your sale of property
##### A Small Preview of what you get here
1. Understanding the Capital Gains
1. Why Short term and Long term holding Matters
2. Possible Excess TDS and Tax Saving Strategies for NRIs
2. Why you overpay and How to fix it
3. Repatriating fund from India
2. Moving sales proceeds abroad without hassles
4. Real Life case study
3. How smart Tax planning in action helps
5. Key Considerations for NRIs
6. Conclusion : Turn Complexity into Confidence
7. Include RMC
#### Understanding the Capital Gains
###### Short- Term Capital Gains ( STCG) : The cost of Quick Sales
If you sell your property within 2 years of buying the profits are taxed as Short - term Capital Gains ( STCG ) at a Flat 30% rate without inflation adjustments. This means :
1. Flat 30% Tax + 4% cess + Subcharge ( If applicable )
2. Why No Inflation Adjustment: You pay tax on the **Entire Profit**, Not Just real Gains
Example
1. You brought a 30 lakh flat in 2022 and sold it for 45 lakh in 2024
1. Profit : 15 Lakhs
2. Tax = 30 % of 15 Lakh = 4.5lakh ( excluding cess/ Subcharges )
##### Long - Term Capital gains ( LTCG ) : The power of Indexation
If you Hold the property for over 2 years, and you quality for Long-term Captial Gains ( LTCG ) taxed at 20% Post - Indexation. Indexation adjusts your purchase price for inflation, Shrinkable taxable profits
**What is Indexation in Property**
Indexation in property refers to adjusting the purchase price of a property to reflect inflation when calculating capital gains tax, allowing investors to reduce their tax liability by accounting for the erosion of purchasing power over time.
**Indexation Formula :**
Indexed Cost = Purchase Price × CII( Cost Inflation Index ) in Year / Purchase CII in Year of Sale
In simple terms : c
Example
1. You brought a Property in 2018 (CII 280) for ₹30 lakh.
2. Sold in 2023 (CII 348) for ₹48 lakh.
3. Indexed Cost = ₹30 lakh × (348/280) = **₹37.29 lakh**.
4. Taxable Gain = ₹48 lakh – ₹37.29 lakh = ₹10.71 lakh.
5. Tax = 20% of ₹10.71 lakh = **₹2.14 lakh** (vs. ₹3.6 lakh without indexation).
**Takeaway**: Holding property for >2 years + indexation = **40% lower tax liability**.
#### Possible Excess TDS and Tax Saving Strategies for NRIs
##### Possible Excess TDS
When selling property in India, TDS (Tax Deducted at Source) may be deducted at a higher rate than the actual tax liability, leading to an excess TDS deduction. This often happens in the case of Non-Resident Indians (NRIs) due to the flat TDS rates applied on property sales.
1. Fixed TDS Rates for NRIs
1. Long-Term Capital Gains (LTCG): 20% (plus surcharge & cess)
2. Short-Term Capital Gains (STCG): 30% (plus surcharge & cess)
3. TDS is deducted on the entire sale value, not just on the net capital gain, causing excess deduction.
2. Indexation Benefits Not Considered
4. For LTCG, indexation reduces taxable gain, but buyers deduct TDS without applying indexation, leading to higher deduction.
3. Lower Actual Tax Liability
1. If the seller is eligible for capital gains exemptions (Sections 54, 54EC, 54F), the taxable amount decreases, but TDS is still deducted on full sale value
4. Application of DTAA (Double Taxation Avoidance Agreement)
2. Some countries have lower tax rates under DTAA, but TDS is deducted at standard Indian rates, leading to excess deduction.
3. Currently, India has DTAAs with **over 85 countries**. Here is a list of some of the key countries that have signed DTAAs with India:
##### Claim Tax Exemptions with Relevant Sections
When selling a property in India, capital gains tax applies. However, you can claim exemptions under various sections of the Income Tax Act to reduce or avoid tax liability. These exemptions are available for both Resident Indians and Non-Resident Indians (NRIs) under specific conditions.
The Exemption is available only for one (unless capital gains are < ₹2 crore, then up to 2 properties can be claimed).
##### **A.** **Section 54EC – Exemption via Capital Gain Bonds**
1. Applicable to: Any taxpayer (Individuals, NRIs, Companies, etc.).
2. Exempts: LTCG from any property sale if reinvested in specified bonds.
###### Eligible Bonds
1. National Highway Authority of India (NHAI)
2. Rural Electrification Corporation (REC)
3. Power Finance Corporation (PFC)
4. Indian Railway Finance Corporation (IRFC)
###### Conditions
1. Invest in capital gain bonds within 6 months from the sale.
2. Maximum investment limit: ₹50 lakh.
3. Bonds must be held for 5 years (earlier 3 years).
##### **B.** **Section 54F – Exemption on Sale of Any Asset (Not Residential Property)**
1. Applicable to: Individuals & HUFs.
2. Exempts: LTCG from the sale of land, commercial property, shares, gold, etc. if reinvested in a residential house.
3. Conditions:
1. The entire sale consideration must be used to buy a new residential house within 2 years or construct one within 3 years.
2. If only a portion is invested, the exemption is proportional.
3. The seller should not own more than one residential house (except the new purchase).
4. The new house must not be sold within 3 years.
##### **C.** **Section 54B – Exemption for Agricultural Land Sale**
1. Applicable to: Individuals & HUFs (not companies).
2. Exempts: Capital gains from selling agricultural land if reinvested in another agricultural land
3. Conditions
1. The sold land must have been used for agricultural purposes for at least 2 years before the sale.
2. The new agricultural land must be purchased within 2 years.
3. The new land must not be sold within 3 years.
#### Repatriating fund from India
###### Step 1: File form 15CA & 15CB
Form
1. Form 15 CA
1. Requirement
1. Form 15CA is a declaration by a person making a payment to a Non-Resident Indian (NRI). It is required when remitting funds abroad or making certain payments to NRIs:
2. When an NRI transfers sale proceeds to a foreign account, the bank requires Form 15CA & 15CB (if applicable) before processing the remittance.
2. Form 15CA Filing Categories
1. Part A – If payment ≤ ₹5 lakh in a financial year.
2. Part B – If payment > ₹5 lakh and TDS is deducted under Section 195.
3. Part C – If payment > ₹5 lakh, requiring Form 15CB from a Chartered Accountant.
4. Part D – If payment is not taxable, Form 15CA is not required.
2. Form 15 CB
1. Requirement
1. Form 15CB is a certificate issued by a Chartered Accountant (CA) confirming that tax on a foreign remittance has been deducted as per Indian tax laws. It is required before filing Form 15CA (Part C) when making taxable payments to Non-Resident Indians (NRIs):
2. If an NRI Sells Property in India and Repatriates Funds Abroad
1. When the property sale proceeds are transferred to an NRI’s foreign bank account, the bank requires Form 15CB along with Form 15CA (Part C).
2. Form 15 CB Filing
1. If the Remittance Exceeds ₹5 Lakh
1. Form 15CB is mandatory before submitting Form 15CA.
2. It ensures that the correct TDS has been deducted before the remittance
###### Here comes the CTA for the RMC with the the downloadable free resource of form 15 ca/ cb
###### Step 2 : Credit funds to Your NRO Account
All sale proceeds must first go to your **Non-Resident Ordinary (NRO) account**.
#### Impact of Property Through Value Threshold ( Above 1 Cr )
The sale of property in India attracts different tax and compliance requirements depending on the transaction value. The key impact areas include TDS (Tax Deducted at Source), stamp duty, and tax exemptions.
###### Property Above 1 Cr
| Property Value | TDS (Resident Seller) | TDS (NRI Seller) | Stamp Duty Impact | Other Implications |
| -------------- | --------------------- | ------------------------------ | ------------------------------------- | ------------------------------ |
| Above ₹1 Crore | 1% TDS | Higher TDS, surcharge possible | Some states levy additional surcharge | Higher tax & compliance burden |
For Other Property Value Threshold, Visit the respective blog for more in-depth analysis and Calculations to get more resonating idea
###### Property Between 50L to 1Cr - Link
###### Property Below 50 Lakhs - Link
##### Sub Charges
surcharge is an additional tax levied on income tax if the taxpayer’s total income crosses certain thresholds. In the case of property sales, surcharges apply primarily to NRIs and high-income individuals on capital gains tax.
###### For NRIs
Surcharge applies based on total taxable income (including capital gains).
Since TDS is deducted at a flat rate, surcharge is included if applicable.
###### Sub Charge Rates on Capital gains ( FY 2023 - 24 )
Total Income (Including Capital Gains) Surcharge on LTCG (20%) & STCG (30%)
| Income | Sub Charge Rate |
| ------------------- | -------------------------------------- |
| Up to ₹50 lakh | No surcharge |
| ₹50 lakh - ₹1 crore | 10% surcharge |
| ₹1 crore - ₹2 crore | 15% surcharge |
| ₹2 crore - ₹5 crore | 25% surcharge (for STCG), 15% for LTCG |
| Above ₹5 crore | 37% surcharge (for STCG), 15% for LTCG |
For Long-Term Capital Gains (LTCG) on property sales, surcharge is capped at 15%, even if income exceeds ₹2 crore.
For Short-Term Capital Gains (STCG) (property held for <2 years), surcharge can go up to 37%.
#### Real Life - Case study of Mr. Kamesh Sells his Villa at 1.2 Crores
( Give more depth towards it with explanation )
**Case Overview**
Seller : Mr. Rajesh, an NRI
Property Sold : Villa in Bangalore
Sale Price : ₹1.2 crore
Purchase Price (10 years ago) : ₹50 lakh
Indexed Cost of Acquisition
(Assuming CII indexation factor of 1.8) : ₹90 lakh
Long-Term Capital Gain (LTCG) : ₹1.2 crore - ₹90 lakh = ₹30 lakh
Tax on LTCG (20% with indexation) : ₹6 lakh
TDS Deducted by Buyer (as per Sec 195) : 20% of ₹30 lakh = ₹6 lakh
**Scenario 1: With Reinvestment (Tax Exemption Under Section 54 or 54EC)**
Mr. Rajesh reinvests the full ₹30 lakh capital gain in:
New Residential Property (Sec 54) within 2 years, or
Capital Gain Bonds (Sec 54EC) within 6 months (up to ₹50 lakh)
Tax on LTCG = ₹0 (as exemption is claimed)
**Transfer to NRO or Foreign Account:**
₹1.2 crore (full sale proceeds) can be credited to the NRO account.
He can repatriate up to $1 million per financial year after Form 15CA & 15CB submission.
Since TDS was deducted (₹6 lakh), he can file for a refund while filing ITR.
**Scenario 2: Without Reinvestment (LTCG Tax Applies)**
Mr. Rajesh does not reinvest the ₹30 lakh capital gain.
Tax on LTCG = ₹6 lakh (20% of ₹30 lakh).
Net Amount Post-Tax: ₹1.2 crore - ₹6 lakh = ₹1.14 crore
**Transfer to NRO or Foreign Account:**
₹1.14 crore is deposited in his NRO account.
He can repatriate up to $1 million per year after tax compliance.
#### **Key Considerations for NRIs**
1. **Surcharge Risks**:
- Income >₹50 lakh? A 10-37% surcharge applies. Use exemptions to stay below thresholds.
2. **Double Taxation**:
- Claim DTAA benefits to avoid paying taxes in both India and your resident country.
3. **Hidden Costs**:
- Stamp duty (5-7%) + legal fees (1-2%) + bank charges (0.1-0.5%) can add up.
#### **Conclusion: Turn Complexity into Confidence**
Selling property below ₹50 lakh as an NRI doesn’t have to mean tiny profits and big headaches. With the right strategies:
- Use **indexation** to account for inflation.
- File **Form 13** to reduce TDS deductions.
- Reinvest gains under **Sections 54/54EC/54F** to eliminate taxes.
- Partner with experts to navigate compliance seamlessly.
#### **Let RMC Simplify Your Sale!**
Why struggle with indexation, TDS, or Form 15CA/CB filings alone? **RMC’s Chartered Accountants** specialize in helping NRIs:
✅ Calculate indexed gains accurately.
✅ Secure lower TDS certificates (Form 13).
✅ File Forms 15CA/CB for swift repatriation.
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