NRI taxation on flat sale and fund transfer to overseas

Hi,

1. The long term capital gains shall be taxable at the rate of 12.5% without indexation. The buyer can deduct TDS and at the time of filing the return you can claim refund of taxes. 
   
   
   
2. You can repatriate money directly from the NRO account upto USD 1 mn in FY. There is no restriction if you repatriate from the NRE account. To repatriate the amounts, you need to file Form 15CA and certificate of CA in Form 15CB
3. Since the transaction is subject to TDS, TCS shall not apply
4. The interest on bonds is taxable at the slab rates
5. This income shall be exempt in Germany as per India Germany DTAA

1. At special rate of 12.5%. If the sale consideration is more than Rs.50 lacs, surcharge would be levied on the tax amount

2. From NRO account to NRE account and then from NRE account to overseas account

3. From NRO to NRE A/c, submit Form A2, Form 15CA, 15CB to your banker. From NRE to Germany bank A/c, you can do through online banking

4. TCS not applicable

5. Plz confirm from bank

6. No TDS deduction

7. Consult local tax advisor in Germany

1. TDS Deduction

Approach:

• It’s acceptable to allow the buyer to deduct TDS on the total sale amount. You can claim the excess TDS as a refund when filing your Income Tax Return (ITR).

TDS Rate:

• For NRIs, TDS on the sale of property is generally 40% of the capital gains (plus applicable surcharge and cess). However, if the buyer deducts TDS on the total sale amount (i.e., the entire sale consideration), the rate is 40% on the total consideration amount (plus surcharge and cess).

Process:

• Ensure that the buyer provides you with a TDS certificate (Form 16A) showing the amount of TDS deducted. You will need this for claiming a refund when filing your ITR.

2. Repatriating Funds Directly from NRO Account

Process:

• 
  NRO to Foreign Account: Repatriating funds directly from an NRO account to a foreign account is subject to certain regulations. You need to:

  • Obtain a Certificate of Tax Deducted at Source (TDS) from the buyer.
  • Obtain a No Objection Certificate (NOC) from the Income Tax Department if the repatriation amount exceeds the permissible limit.
  • Fill out the necessary forms and provide them to your bank along with the tax certificates.

3. Repatriation via NRE Account

Process:

• 
  Step 1: Transfer from NRO to NRE Account

  • You need to get authorization from your bank to transfer funds from an NRO account to an NRE account. This generally involves submitting a request along with the necessary documentation.

• 
  Step 2: Transfer from NRE Account to Foreign Account

  • Once funds are in the NRE account, you can transfer them to your bank account in Germany. This step can be done via personal online banking.

4. TCS Applicability

TCS (Tax Collection at Source):

• TCS does not apply to transfers from NRO to foreign accounts or NRE accounts. TCS typically applies to the sale of certain goods and services, not to the repatriation of funds.

5. Bank Charges

Charges:

• Bank charges for international transfers vary by bank. For SBI:

  • 
    NRO to Foreign Account: Charges typically include a flat fee plus a percentage of the transfer amount. The fee can range from ₹1,000 to ₹3,000 or more.
  • 
    NRE to Foreign Account: Similar charges apply, and are often in the same range as for NRO accounts.

Other Charges:

• 
  Bank’s Correspondent Fees: Some banks might charge additional fees for handling international transfers.
• 
  Taxes: There are no additional taxes on the transfer itself apart from the bank charges and TDS already deducted.

6. TDS on Interest from Government Bonds (Section 54EC)

TDS Rate:

• Interest earned on government bonds under Section 54EC is generally 10%. The TDS rate may vary based on the bond issuer and applicable rules.

7. Tax Declaration in Germany

Declaration:

• Yes, you need to declare interest income from these bonds in Germany. The Double Taxation Avoidance Agreement (DTAA) between India and Germany allows you to claim a credit for taxes paid in India, but you may need to pay the difference if German taxes are higher.

Answers to your queries:

1) You can advise the buyer to deduct TDS and then you claim credit for the same after filing your return. You may get refund or have additional tax liability depending upon your actual tax liability. 

The buyer will have to deduct tax u/s 195, which is applicable to Non Residents and not u/s 194-IA which is applicable to Residents only and not for Non Residents. The TDS u/s 195 will be on your income at applicable rates, which is now about 20%. If you are opting for new tax regime, without the benefit of indexation, then it will be 12.5%. Surcharge will be applicable if the income is more than Rs 50 Lakhs. 

Certificate for lower deduction of tax can now be obtained online also. You need to assign a CA in your login. You may choose this option as you may have to assign a CA, in any case, for repatriation of funds after the sale is done. 

2& 3) You may even advise the buyer to remit the sale proceeds directly to your account in your country. You need to submit 15CB by a CA. You can also, alternatively, follow the usual course of remitting the funds to your NRO account in India. You can then repatriate your funds to your country again by submitting Form 15CA and 15CB to the bank. 

4) TCS is not applicable.

5) Not sure of the bank charges. 

6) If the tax liability is substantial you may still choose to invest in 54EC bonds. The interest will be credited to your designated bank account and TDS will be deducted @ 20% 

7) If you are resident of Germany, you need to declare your global income, i.e., income earned in India , i.e., both the capital gains and interest earned on 54EC Bonds. You will get double taxation relief. 

1. TDS Deduction

You mentioned that the special tax rate of 12.5% applies for NRIs, and if the sale consideration exceeds Rs. 50 lakhs, a surcharge will be levied. I understand that the buyer will deduct TDS on the total sale amount, and I can claim a refund for any excess TDS during ITR filing.

2. Repatriation Process

For transferring funds, it seems the recommended process is:

• First, transfer the sale amount from my NRO account to my NRE account.
• Then, from my NRE account, I can transfer the funds to my German bank account.

3. Required Documents for NRO to NRE Transfer

I understand that I need to submit Form A2, Form 15CA, and Form 15CB to the bank for the transfer from my NRO to NRE account. Once the funds are in my NRE account, I can proceed with transferring them to my Germany bank account through online banking without further authorization.

4. TCS Applicability

Thank you for confirming that TCS is not applicable in this case.

5. Bank Charges

I will confirm the exact charges with the bank, as you suggested.

6. TDS on Section 54EC Bonds

I understand that there will be no TDS deduction on the interest earned from Section 54EC bonds.

I appreciate your clear and helpful advice. If there are any additional steps or details I should be aware of, please let me know.

7. Declaration of Interest Income in Germany

Lastly, as per the India-Germany DTAA, I assume I will need to declare the interest earned from 54EC bonds in Germany and may have to pay additional taxes given the higher tax rates there. 

For detailed, personalized advice, consider a phone consultancy.

Hope you find the information helpful. You are free to contact me for further discussion.If you could spare two minutes of your time to write a review, It would be really grateful and very happy to read it.

Thank you.

Shubham Goyal

1 TDS rate would be 14.3% (Basic rate 12.5%+Surcharge 10%+Ed.cess 4%)

2 Post issue of 15CB, Part C of Form 15CA. Other document is Form A2

3. No TDS

Note: You can also apply for lower/NIL TDS deduction certificate

1) TDS on Sale of Property by an NRI

You are right to highlight the need for clarification regarding TDS (Tax Deducted at Source) on the sale of property by an NRI. Based on the ICICI Bank article and general tax guidelines:

• For long-term capital gains (LTCG) on property, where the property is held for more than 2 years, the TDS rate applicable for NRIs is 20%. This is in line with the provisions of Section 195 of the Income Tax Act, 1961.

• When adding surcharge and cess, the effective TDS rate for a property with sale consideration between INR 50 lakh to 1 crore works out to 22.88%.

• This TDS rate is not the same as the LTCG tax rate. The 12.5% rate you referred to is the LTCG tax rate without indexation benefits under the new regime. The buyer is responsible for deducting 22.88% TDS from the sale consideration (in your case, as the sale value is between INR 50 lakh and 1 crore).

In conclusion, the TDS rate applicable is indeed 22.88%, not 12.5%.

2) Form 15CA and Form 15CB for Repatriation of Funds

For repatriating funds exceeding INR 5 lakh from your NRO account to your NRE account or foreign bank account, Form 15CA and Form 15CB are necessary. Here's how the forms apply:

• 
  Form 15CA: This form is a declaration of remittances by the individual.

  • 
    Part C of Form 15CA needs to be filled if the remittance exceeds INR 5 lakh in a financial year, and you require a certificate from a Chartered Accountant in Form 15CB.

• 
  Form 15CB: This is a certificate from a Chartered Accountant, confirming the tax payments on the funds being repatriated.

Other Documents Required:

• 
  Form 15CB from a Chartered Accountant.
• 
  PAN card copy.
• 
  A valid tax residency certificate (if available, this helps with tax benefits under DTAA agreements).
• 
  Bank details for the destination account (either your NRE or the foreign account).
• 
  Proof of the source of funds (like the sale deed of property, bank account statements, etc., if applicable).

3) TDS Deduction on Interest from Government Bonds

Interest earned on government bonds by NRIs is typically subject to TDS. However, the exact rate depends on the type of bond:

• If the bonds are RBI 7.75% Savings Bonds or Sovereign Gold Bonds, the TDS is 10% under Section 194A (for resident NRIs) or 20% under Section 195 (non-residents), depending on your tax residency status.

To clarify:

• If you are a resident for tax purposes, the TDS rate is 10%.
• If you are an NRI, the TDS rate is typically 20% as per Section 195.

This also depends on whether India has a Double Taxation Avoidance Agreement (DTAA) with the country where you reside, which could potentially lower the TDS rate.

Conclusion:

1. 
   TDS on property sale: 22.88% on sale value (50L-1Cr).
2. 
   Form 15CA: Yes, Part C needs to be filled.
3. 
   TDS on bonds: Likely 20% for NRIs unless lower due to DTAA.

Feel free to ask for any further clarifications!

1) Forms 15CA (Part C) and Chargeable to Tax

The reason the transfer amount is noted as "Chargeable to Tax" in Forms 15CA (Part C) even after TDS deduction is that this designation is used to clarify that the amount being transferred (remitted) has tax implications in India. TDS is a mechanism for the Indian government to ensure that taxes are collected on transactions involving NRIs at the point of transaction, but the actual tax liability is determined when you file your income tax return. The Form 15CA and Form 15CB help the Income Tax Department track these transactions and ensure that all appropriate taxes have been paid before the money is moved out of India.

2) Declaring the Purpose of Transfer

If you're required to fill out Form 15CA and the specific part of the form doesn't ask for the purpose of the transfer, this information may not be mandatory for that particular section of the form. However, generally, the purpose code (e.g., S1301 for "Remittances by non-residents towards family maintenance and savings") is more relevant in other reporting like the Liberalised Remittance Scheme (LRS) form or bank remittance forms rather than in Form 15CA which is focused on the tax aspect of the transaction.

3) Declaration of "Chargeable to Tax" on Form 15CA

If the form asks whether the amount is "Chargeable to Tax" and it pertains to funds that are involved in a transaction subject to Indian tax laws (like property sale proceeds), you should declare it as such. The TDS deduction does not negate the need to report that the funds are chargeable; it's an upfront collection of expected taxes due.

Query regarding Form 15CB:

4) Remittance Details on Form 15CB

It sounds like there is some confusion due to the typical requirement for remittances going to a foreign country. In your case, since the transfer is between two accounts in India (from NRO to NRE), the usual requirements about mentioning a foreign country and foreign currency do not apply. Your CA should:

• 
  Country of Remittance: Mention India, as both accounts are in India.
• 
  Foreign Account Number: Indicate your NRE account number, even though it's not foreign.
• 
  Currency of Remittance: Indicate INR (Indian Rupees) as the currency.

1. TDS Deduction by Buyer

Yes, your approach of letting the buyer deduct TDS and claiming any excess refund through ITR filing is valid. However, the TDS rate for NRIs is generally 20% on long-term capital gains if the property has been held for more than 2 years, which applies in your case (property purchased in 2014). Including surcharge and cess, the effective rate can reach approximately 22.88%, depending on the sale amount (e.g., between ₹50 lakhs and ₹1 crore)​​.

2. Repatriation of Funds from NRO Account to Germany

To repatriate funds directly from your NRO account to your bank account in Germany, you will need:

• 
  Form A2: For declaring the remittance
• 
  Form 15CA (Part C): For reporting the remittance
• 
  Form 15CB: A certificate from a Chartered Accountant (CA) confirming the tax obligations have been met​​.

These forms should be submitted to your bank, and once processed, the funds can be transferred to your overseas account. The remittance is subject to Indian regulations, including the $250,000 limit under the Liberalized Remittance Scheme (LRS).

3. Two-Step Transfer (NRO to NRE to Germany)

The process for transferring funds from your NRO to your NRE account is the same as the direct transfer to Germany. You will need to submit Form A2, Form 15CA (Part C), and Form 15CB to your bank. Once the funds are in your NRE account, you can repatriate them abroad using online banking without additional authorization​. However, NRO-to-NRE transfers may require additional scrutiny to ensure that taxes have been paid on the repatriated amount.

4. Applicability of TCS

Tax Collected at Source (TCS) is not applicable to the repatriation of funds or transfers between your NRO and NRE accounts, as TCS is generally related to the purchase of certain goods and services​​.

5. Bank Charges

For foreign transfers, bank charges vary, but for SBI, they typically range between 0.75% to 1% of the transaction amount, plus GST. In addition, there might be correspondent bank fees or SWIFT charges for international transfers. It is advisable to check with your bank for exact fees​​.

6. TDS on Interest from Section 54EC Bonds

There is no TDS on interest earned from Section 54EC bonds for NRIs​​. However, this interest will still be subject to income tax as per your applicable slab rates in India.

7. Declaration of Interest Income in Germany

Yes, under the India-Germany DTAA, you must declare the interest income in Germany. Since Germany has higher tax rates than India, you may need to pay additional taxes in Germany after claiming credit for the tax paid in India​​.