Weakening rupee has led to a surge in NRIs buying property in India. An Assocham Report released last year said that property purchase by the NRIs have increased to 35% in comparison to 18% the previous year. The NRI community felt comfortable with the new Government too, which resulted into more purchase here.

But are these investments for retirement home or for homecoming and settling back in India? Rarely. These are mostly for investment. That means the sale proceeds and the profit made out of it needs to travel back to the foreign country.

There is a lot of ambiguity around the foreign currency going back abroad. The repatriation of funds is an integral part of the transaction for these investors and here I would like to simplify it.

Repatriation of the principal amount:

1. If the property is purchased with funds brought into India through banking channels(i.e. foreign currency that was either directly transferred to the builder or seller’s account or to the NRI’s own NRE account first and then paid to seller through issue of a cheque from the NRE account) or through funds already available in NRE account: The entire principal invested can be repatriated without any restrictions, for a maximum of 2 residential properties and an unlimited number of commercial properties in the lifetime of the NRI buyer. There is no permission needed from RBI to do this.

Restriction: From the third property onwards, the principal portion has to be deposited in an NRO account of the NRI, from which a maximum of USD 1 Mn (approx Rs.6 crores) can be repatriated per financial year.

2. If the property is purchased entirely with funds lying in NRO account: The complete sale proceeds(both principal and profits) must first be deposited in an NRO account and then a maximum amount of USD 1 Mn can be repatriated out of that per financial year.

3. If property is purchased with a combination of existing funds in NRO account and fresh foreign currency remitted from abroad or from balances existing in NRE/FCNR accounts: The respective rules explained above apply in proportion of funds invested. It means, the principal invested out of the NRO account can be repatriated only to the extent of USD 1 Mn and the principal invested from external sources or NRE/FCNR funds can be repatriated completely without any limit (but subject to restriction on number of residential properties as explained earlier).

It is advised that a CA be involved during the process of repatriation as if the sum is large and requires RBI’s permission, then only a chartered accountant can help you with the paperwork.

The short and long term capital gains tax matter also need to be understood from your CA.

Sukanya Kumar, Founder and Director, RetailLending.com