Subject : Selling Property in India – Parent demise, two Children Settled abroad
Note on Property Funds Transfer
Background : The situation is as below:
One of my uncle (widower) passed away last week.
They have one property in Pune, Maharashtra
He is survived by 2 sons and 1 daughter out of which 1 son is in India and rest two children are overseas (NRI now)
My uncle did not leave any “will” behind.
So now we will get the property transferred in name of 3 children (equal share).
Finally they want to sell this property.
How can the NRI children receive their part of share from sale proceeds ? Do they need to set up NRI account in India first? For sure no buyer is going to remit them overseas as it is tedious process.
What will be tax implications on NRIs once they receive this money ?
There are different options
Let us see, these along with pro’s and con’s
This will enable the family to take the best call
Part 1A : How to have a clear title
First involve Lawyers and Courts, and get Probate in favour of three children jointly, with 1/3rd share each
Then, allow them to sell jointly
Buyer gets the property including court judgement ( so , title is clear ), and seller three people get their money
Part 1B : TDS part of this
TDS will be 1% for the Indian resident son
And TDS will be 20% on the sale value… for the two NRI sellers (relatively bigger amount)
Part 1C : Funds transfer leg of the above
The NRI’s if take money in India
Open bank account in India
For that need a PAN in India
Can either will need a PAN in India
And file return in India
And then maybe get refund in India, if applicable, after return filing in India
The NRI’s if take money directly outside India
Get money directly outside India
Yes, the buyer’s bank can transfer funds to abroad.. but yes, it will be slightly more effort for the buyer.
Part 1D : Return filing in India for NRI’s
In both situations, the NRI’s are selling the property in their own name, so, TDS is on their PAN, and so
They must file return in India ( since anybody with more than Rs 25000 TDS has to file return in india , as per law amended 2022 July
Refund of tax ?
Yes, possible, based on actual facts and actual calculations. So, NRI’s may get refund in India, if applicable, after return filing in India. ( after tax calculation)
So, again will / can open a account in india
It will also be tight, if they don’t have address proof in India ( to check )
And bank will be in which status ? Resident or non resident ?
What is the other option ?
It has its own pro’s and con’s
So, have a look at this also
All 3 children file documents in the court, and declare in a family settlement in favour of the Indian son.
Indian Son becomes the sole owner of the property
He can sell the property in India,
TDS is just 1%
Gets the money
And later / before he can gift some funds to his foreign brother / sister
No bank account in India
No other work in India
No future obligation in India
Easy to buy, easy TDS, easy transfer
Controller for the temporary phase
Funds safety ?
Go into an imprest account / escrow account
Maybe jointly controlled by the 3rd party ( anybody on whom all have faith )
And clarity that funds from this account will be used as per joint decision
Now, according to the new provisions, if an individual’s aggregate tax deducted at source during the previous year’s assessment is twenty-five thousand rupees (Rs. 25,000) or more, the person is supposed to file Income Tax Returns even if that person’s taxable income is less than the maximum amount which is not chargeable to income tax under the Income Tax Act.
However, this rule is different for senior citizens. For senior citizens, the limit is fifty-thousand rupees (50,000 Rs.).
And the PAN to be surrendered after 2 years , if the NRI has no plan to come every to India