New Beginning the Three Question Thursday: TDS on Property Sales, SGBs, and Bank Accounts

With the changing financial situation, Non-Resident Indians (NRIs) too have certain issues in managing their money in India. Right from selling property to investing in gold and banking regulations, staying informed is imperative. Let us consider Three Questions that NRIs have.

Question 1: What is the latest TDS rates for NRIs selling property?

Sale of a property in India as an NRI can be a cumbersome process because of increased Tax Deducted at Source (TDS) rates:

Short-term capital gain (holding period is less than 24 months): 30% TDS on the sale consideration.

Long-term capital gain (holding period is more than 24 months): 12.5% TDS along with cess and surcharges as may be applicable.

For instance, if you are selling a property for ₹1 crore in three years, ₹12.5 lakhs will be deducted as TDS. NRIs can reclaim excess TDS by submitting income tax return or get lower TDS certificate under Section 197 before sale.

Principal Buyer Obligations:

• Get TAN (Tax Deduction Account Number).
• Deduct tax and provide Form 16A (TDS certificate).
• Submit TDS return.
• Verify the TDS deposit on TRACES portal.

Question 2: Can NRIs invest in Sovereign Gold Bonds in India?

Sovereign Gold Bonds (SGBs) provide a safe method of investing in gold without owning it physically. But according to FEMA rules, NRIs cannot invest newly. Resident investors who already own SGB holdings can hold them until maturity or for early redemption.

Major Advantages of SGBs for NRIs:

• 2.5% per annum interest (taxable in India).
• Tax-free capital appreciation if held until maturity (8 years).
• Investment in FCNR or NRE accounts can facilitate repatriation of interest and principal.
• 4 kg gold annually limit.

Question 3: Is it mandatory for NRIs to close resident bank accounts after moving abroad?

Resident accounts need to be converted back to NRO (Non-Resident Ordinary) accounts under FEMA regulations after becoming an NRI. Having resident accounts open can attract penalties up to three times the amount involved.

Conversion Procedure:

• Notify your bank of NRI status.
• Submit foreign address proof, passport copy, and visa details.
• Complete the bank’s NRI conversion forms.
• Fixed deposits will be restructured as NRO-FDs.
• Demat accounts must be converted to NRI demat accounts.

Conclusion

NRI financial intricacies need an acquaintance with tax implications, investment options, and regulatory terms. From TDS on sale of property to maximizing SGBs and transforming resident accounts into NRO status, there is a goldmine of facts waiting to be harnessed to enable NRIs to hone their financial planning.

For expert guidance, Prime Wealth, a top finance advisory, believes that it assists NRIs in the optimal manner to invest and utilize tax with minimum inconvenience.

FAQs

1. Can TDS be avoided on property sales as an NRI?Ans- Apply for a lower TDS certificate under Section 197.
2. Can SGBs be purchased through an NRO account?Ans- No, only through NRE or FCNR accounts.
3. What happens if resident accounts are not converted to NRO status?Ans- It violates FEMA regulations and can lead to penalties.
4. Is SGB interest taxable for NRIs?Ans- Yes, the 2.5% annual interest is taxable in India.
5. Can SGB proceeds be repatriated?Ans- Yes, if invested through an NRE or FCNR account.
6. Can excess TDS on property sales be reclaimed?Ans- Yes, by filing an income tax return in India.
7. How long can SGBs be held after becoming an NRI?Ans- Until maturity or opt for early redemption.
8. Do fixed deposits need to be closed after becoming an NRI?Ans- No, they will be redesignated as NRO-FD on renewal.
9. Can savings accounts be operated while temporarily abroad?Ans- Yes, if abroad for less than 182 days in a financial year.
10. What is the penalty for not converting to NRO status?Ans- Up to three times the amount involved under FEMA regulations.

Disclaimer: The information provided here is for educational and informational purposes only and should not be construed as financial, legal, or tax advice. Consult with a qualified professional before making any investment decisions. We do not accept any liability for errors or omissions in this information nor any direct, indirect, or consequential losses arising from its use.