The number people quote from memory is right for the commonest situation and wrong for two others, so it is worth knowing which route your sale falls into before you commit to a timetable.
Two layers, in this order
Tax first, exchange control second. They are administered by different bodies under different statutes and satisfying one does nothing for the other. The Reserve Bank says so itself: its Master Direction on Remittance of Assets records that remittances are subject to payment of applicable taxes in India, that the Bank will not issue instructions clarifying tax issues, and that it is mandatory for authorised dealers to comply with the requirements of tax law. Your bank is therefore not being difficult when it asks for the tax paperwork. It has been told to.
Route one: the annual facility
This is the route most sales use. The Master Direction on Remittance of Assets provides that authorised dealers may allow a non-resident Indian or person of Indian origin, on submission of documentary evidence, to remit up to one million US dollars per financial year out of balances in their non-resident ordinary accounts, the sale proceeds of assets, and assets acquired in India by way of inheritance or legacy, and that transfers to non-resident external and special non-resident rupee accounts may be made within that same facility. The Master Direction on Deposits and Accounts states the same limit from the account side.
Two features of it are regularly missed. Where the remittance is made in more than one instalment, all instalments must go through the same authorised dealer. And where the money is coming out of an NRO account, the bank must obtain an undertaking from the account holder that the remittance is out of legitimate receivables in India and not out of borrowings or a transfer from another NRO account, with a warning of penal consequences if it is not.
Route two: property bought with foreign exchange
The Reserve Bank's Master Direction on acquisition and transfer of immovable property provides a distinct facility where the immovable property sold is not agricultural land, a farm house or plantation property. The authorised dealer may allow repatriation of the sale proceeds if the property was acquired in accordance with the foreign exchange law in force at the time, and the amount for the acquisition was paid in foreign exchange received through banking channels or out of funds held in a non-resident external or foreign currency non-resident account. Where the property was bought with a housing loan repaid out of remittances from abroad or by debit to those accounts, those repayments are treated as equivalent to foreign exchange received.
The same Master Direction states that in the case of residential property, repatriation of sale proceeds is restricted to not more than two such properties. It is a lifetime restriction on the facility, not an annual one. If you have already repatriated the proceeds of two residential properties on this basis, the third sale goes back into the annual facility, and that changes the timetable rather than the entitlement.
Route three: property you acquired while you were resident
Where the property was acquired under the provision of the Foreign Exchange Management Act, 1999 that lets a person resident outside India hold property acquired when he was resident in India or inherited from a person who was, the Master Direction says the sale proceeds cannot be repatriated without the prior permission of the Reserve Bank, but adds that a person who is resident outside India may use the remittance facilities under the Remittance of Assets Regulations. In practice that means route one, with its annual ceiling.
What the bank will ask for
- Proof of how you acquired the property. The purchase deed, the payment trail, and where route two is claimed, evidence that the price came in as foreign exchange through banking channels or from a non-resident external or foreign currency account.
- Proof of the sale. The registered sale deed and the receipt of consideration.
- The tax documents. Evidence of the deduction made by the buyer and the tax forms that accompany a remittance abroad.
- The undertaking, where the money is in an NRO account. In the wording the Master Direction sets out.
- A single authorised dealer for the whole exercise. Choose the bank before the first instalment, not after.
Before any of this
The deduction on a non-resident sale depends on the chargeable sum, applicable rate and any lower certificate or determination of the taxable proportion, so the amount actually available to remit is decided at the sale stage and not at the bank. Our guide on tax deduction when an NRI sells Indian property sets that out, and our guide on repatriating money from India as an NRI covers the remittance side. Confirm the current limit and the documents with your authorised dealer bank, and the tax computation with a chartered accountant for your transaction and tax year, because both are administered case by case.