Things an NRI must remember while selling property in India
Income-tax on sale
Profits earned by selling property in India will be liable to capital gains tax under the Income-Tax Act, 1961. Capital gain is the difference between the sale value of the property and its cost of purchase. Capital gains can be classified as short term (up to 36 months) or long term (more than 36 months), depending on the period for which the property is held. Short-term capital gain will be taxed at normal slab rates and long-term gain will be taxed at 20%, subject to certain conditions.
How to reduce tax liability
Investing the sale proceeds in purchase/construction of another house property: If a residential property is sold after being held for more than three years and the proceeds are reinvested for purchase of a new residential property, then the capital gains will be exempt to the extent of the amount reinvested. The exemption is subject to the new property being purchased within a year before or two years from the date of sale, or if new property is being constructed within three years from the date of sale.
Investment in Capital Gain Account Scheme: If an NRI was not able to make the necessary investments, the Act provides that the amount can be kept in a nationalised bank under the Capital Gain Account