Can I Deposit Real Estate Sale Proceeds into My NRE Account?

Ans: As you must be aware, if person wants save tax on capital gain, person should acquire another residential house within a period of three years from the date of transfer of the old house or should construct a residential house, within a period of one year before or two years after the date of transfer of old house.

With effect from Assessment Year 2021-22, the benefit in respect of investment made in two residential house properties is available. The exemption for investment made, by way of purchase or construction, in two residential house properties shall be available if the amount of long-term capital gains does not exceed Rs 2 crore.

If assessee exercisesoption, he shall not be entitled to exercise this option again for the same or any other assessment year.

Benefit will be lower of following:

• Amount of capital gains arising on transfer of residential house; or
• Amount invested in purchase/construction of new residential house property

If till the date of filing the return of income, the capital gain arising on transfer of the house is not utilised (in whole or in part) to purchase or construct another house, then the benefit of exemption can be availed by depositing the unutilised amount in Capital Gains Deposit Account Scheme in any branch of public sector bank, in accordance with Capital Gains Deposit Accounts Scheme, 1988.

So in your case, if you satisfy all the prescribed conditions (including acquiring new property within 3 years, depositing unutilised amount in capital gain deposit account and disclosure is made regarding same in ITR of AY 2022-23 & AY 2023-24); you will get IT benefit.

Ans: There are two main Income Tax (IT) rules in India for reinvesting the amount received after selling a property/flat to save capital gains tax:

Section 54: This is the most common option for reinvesting capital gains from the sale of a residential property.

Here's what you need to know about Section 54:

Reinvestment option: You can reinvest the entire sale proceeds in one new residential property.
Time limit: The new property must be purchased within one year before the sale or two years after the sale of the old property.
Construction option: If you plan to construct a new residential property, the construction must be completed within three years from the sale date.
Partial reinvestment: If the new property costs less than the sale proceeds, the exemption is available only for the reinvested amount. You may need to pay capital gains tax on the remaining amount.
Section 54EC: This section offers an alternative for reinvesting capital gains from any type of property, not just residential.

Here's what you need to know about Section 54EC:

Reinvestment option: Invest in specific long-term capital gains bonds issued by the National Housing Bank (NHB) or other government bodies.
Time limit: You must invest the capital gains amount within six months of the sale date.
Investment limit: There is a maximum investment limit of Rs. 50 lakh per taxpayer.
Lock-in period: The bonds come with a lock-in period of at least 3 years.
Remember:

These are just the general highlights of the two sections. It's advisable to consult a chartered accountant (CA) or tax advisor for specific guidance based on your situation.
They can help you determine which section is more suitable for you and ensure you meet all the eligibility criteria to claim the exemption.

Ans: Can Sale Proceeds of a Property Held for Over 10 Years and Purchased from NRE Account be Credited Back to NRE Account?

Short Answer: No.

Long Answer:

While it might seem logical to credit the sale proceeds of a property purchased with NRE funds back to the same NRE account, the Foreign Exchange Management Act (FEMA) in India has specific regulations for this.

Key Points:

• Sale Proceeds Account: The sale proceeds of any property in India, regardless of the source of purchase funds, must be credited to a Non-Resident Ordinary (NRO) account.
• Repatriation Limits: You can repatriate up to USD 1 million per financial year from your NRO account, including sale proceeds. This amount is cumulative for all capital transactions.
• Long-Term Capital Gains Tax: If you've held the property for more than 10 years, you may be eligible for long-term capital gains tax benefits. However, this is a separate tax matter -- more so after the removal of indexation benefits for calculating LTCG as per the provisions of Union Budget 2024-25 -- and doesn't affect the account where sale proceeds are credited.

Why NRO Account?

The NRO account is specifically designed to hold income earned in India by non-resident Indians. Since the sale proceeds of a property in India are considered income earned in India, they must be parked in an NRO account.

Additional Considerations:

• TDS Deduction: The buyer is required to deduct Tax Deducted at Source (TDS) on the sale amount.
• Form 15CA/15CB: You will need to submit Form 15CA and 15CB to repatriate the sale proceeds.

Seeking Professional Advice:

Given the complexities of NRI taxation and foreign exchange regulations, it is highly recommended to consult with a tax and foreign exchange expert or a chartered accountant who specializes in NRI matters. They can provide tailored advice based on your specific circumstances and ensure compliance with all applicable laws.

By following these guidelines and seeking professional advice, you can smoothly navigate the process of selling your property and managing the sale proceeds.