Nearly 46% of NRI property owners are planning to sell their Indian assets to rebalance global portfolios. With the Income-tax Act, 2025 now in effect, the process requires strict adherence to new tax filings, FEMA norms, and repatriation limits. Navigating these rules incorrectly can lead to heavy TDS deductions, penalties, and international fund transfer delays.
A significant trend is emerging in the Indian real estate market, with nearly 46% of Non-Resident Indian (NRI) property owners actively looking to sell their holdings to free up capital for global investments. However, for those finalizing these sales after April 1, 2026, the process is governed by the updated Income-tax Act, 2025, which adds layers of complexity to documentation and tax compliance.
Navigating the TDS and Tax Certificate Process
A primary friction point for sellers is the management of Tax Deducted at Source (TDS). Under the new norms, if a seller fails to provide the correct documentation, the buyer is often required to deduct tax on the entire sale value rather than just the capital gains. This often results in a massive upfront cash blockage. To prevent this, sellers typically need to secure Form 15CA and Form 15CB. Form 15CA is an online self-declaration, while Form 15CB is a certificate from a chartered accountant verifying the tax calculation. Without these, banks often refuse to process international remittances, stalling the sale proceeds.
FEMA and Banking Restrictions
Compliance with Foreign Exchange Management Act (FEMA) regulations remains critical. Sale proceeds from Indian property must be credited to a Non-Resident Ordinary (NRO) account. A common misunderstanding involves the repatriation limit. NRIs are capped at transferring USD 1 million per financial year out of India from their NRO accounts. Any attempt to bypass this limit or use non-compliant accounts can trigger regulatory scrutiny. Furthermore, funds from NRE or FCNR accounts cannot be used for the direct settlement of property sales, a rule that catches many unaware sellers and leads to penalties.
Risks of Valuation and Double Taxation
Investors must also be cautious about the valuation of the property. Selling below the government-mandated circle rate can lead to income tax penalties, as the difference is often treated as deemed income. Additionally, international tax planning is essential. Many NRIs fail to leverage the Double Taxation Avoidance Agreement (DTAA) between India and their country of residence. If this agreement is not correctly cited or utilized, the seller may end up paying tax on the same gain in both countries. Accurate documentation, including the original sale deed and proof of long-term holding, is essential to claim these treaty benefits and reduce the overall tax burden.
The most important monitorable for sellers now is ensuring their Permanent Account Number (PAN) is correctly linked and that their tax residency status is updated in the Indian system. Before initiating a sale, NRIs are increasingly seeking validation of their tax records and FEMA compliance to ensure that the eventual repatriation of funds does not face unexpected rejections or delays.