74. Sell Flat in India - Transfer

Money from India to USA

Q. Dear Mr. Chand -- I refer to the attached link (http://www.nriinformation.com/questions_one.htm) and specifically the below Q&A. Though I'm not the person who originally asked the question below I have a similar background (and similar interest in purchasing a flat in India) and have 3 follow-up questions: 1. As a US citizen (residing outside India) and OCI card holder, is it required (or advisable) for me to first obtain a PAN card before purchasing a flat in India? I'm asking because you mention taxes having to be paid in India on any capital gains. 2. With respect to tax on any capital gains, do you know whether my US citizenship would result in additional capital gains taxes having to be paid in the US? 3. You mention below only being able to repatriate USD up to the amount of the original purchase price once the property is sold: is this until taxes on any capital gains have been settled in India or rather indefinitely -- if the latter, is there no other legal means to take these gains out of India? Thanks, AJ _______________________________ ORIGINAL QUERY: OCI Holder Buying Flat in India Q: Hello Sir, I have found your site from a Google search and I was wondering whether you can help me with this question. I am a US Citizen that holds an OCI card. I am interested in investing in a flat in India with the sole purpose of reselling after a 5-6 years and reconverting the amount back in US Dollars. Is this even possible? Is there a limit on the amount of Rupees I can convert to US Dollars. And where would the taxes be paid on such a transaction? Thanks, Thomas Kunnumpurath A: As a OCI holder you can purchase a flat in India. Once the property is sold, you can reconvert the money into US dollars and bring it back to the United States. However you can only bring back the amount you originally submitted. The profit will be taxed as capital gains in India. Unfortunately, many properties are bought and sold with cash that is unaccounted for and is commonly referred to as black money. Many buyers insist on paying a sizeable amount of money in cash and there is no record of such a payment. India no longer has a foreign currency shortage and it is now quite easy of any Indian citizen to submit funds abroad as long as the transaction is done via legal banking channels and the source of the money can be accounted for. When selling a property in India one should insist on getting maximum amount of money for the sale by way of bank cheques and drafts. A. Pan Card is not mandatory for NRIs to purchase property in India. Getting a Pan Card is a simple process that hardly takes a few weeks. As you have not bought the flat yet the question of capital gains currently does not arise. While it may not be legal, people supposedly buy and sell properties in India with a considerable sum of money changing hands that is in the form of cash. A good accountant in India can advise you better and perhaps save you money. India and the United States have a tax treaty agreement whereby double taxation is avoided. However check with your accountant in the US who should be able to guide you further in this regard. It is now easier to transfer money out of India. As long as the source of the money is legal and can be verified. So if you decide to sell a property, get payments by way of documented bank transactions like cheques and avoid cash deals. Once taxes are paid money can usually be transferred out.