Selling Property in Kerala as an NRI — Complete Legal Guide

Selling property in Kerala from abroad is one of the most common legal requirements NRIs face — and one of the most procedurally complex. It involves Indian property law (Registration Act, 1908; Transfer of Property Act, 1882; Kerala Land Reforms Act, 1963), income tax (TDS under Section 195 of the Income Tax Act, 1961), foreign exchange law (FEMA, 1999 and RBI regulations), and the procedural requirements of the Kerala Registration Department. Each of these frameworks must be satisfied correctly. A failure in any one — an incorrectly executed PoA, unpaid TDS, an undisclosed encumbrance, or a wrong repatriation procedure — can delay the transaction significantly or expose the NRI seller to tax liability and penalties.

Title Verification Before Sale

Before any sale transaction proceeds, the NRI seller must verify the title to the property. An Encumbrance Certificate obtained from the Sub-Registrar's office covering the preceding thirty years will reveal all registered transactions — sale deeds, mortgages, charges, leases, gifts and court orders registered against the property. This must be obtained and reviewed by a qualified advocate in Kerala before the sale proceeds. If the property is mortgaged, the mortgage must be discharged before or simultaneously with the sale. Where ancestral property is being sold, the legal heirs of all deceased owners in the title chain must be identified and their shares accounted for — a legal heir who has not executed a release or consented to the sale can challenge it later. The title search also reveals whether the property is subject to any Kerala Land Reforms ceiling restrictions or other regulatory encumbrances.

Power of Attorney — Execution from Abroad

An NRI who cannot visit India must execute a Power of Attorney in favour of a trusted representative — typically a family member or a professional — to conduct the sale on their behalf. The PoA must be a specific PoA (not a general PoA) authorising the holder to execute and register the sale deed for specifically described property at a stated or negotiated consideration. The method of execution depends on the country of residence. In countries that are parties to the Hague Apostille Convention (including the UK, USA, Australia, Germany, France and most European countries), the PoA should be executed before a notary public in that country and then apostilled by the designated authority. In countries not parties to the Apostille Convention (including the UAE and other Gulf countries), the PoA must be executed before the Indian Consulate or Embassy. Once received in India, the PoA must be adjudicated (stamped) at the appropriate stamp duty rate and may need to be registered at the Sub-Registrar's office if it relates to immovable property — this is required under Section 17 of the Registration Act, 1908 for PoAs relating to property transactions in Kerala.

TDS on NRI Property Sale — Section 195

The buyer of property from an NRI seller is obligated under Section 195 of the Income Tax Act, 1961 to deduct TDS from the sale consideration before making payment to the NRI. This applies regardless of whether the buyer is a resident Indian or another NRI. The applicable TDS rate depends on the holding period of the property. If the property is a long-term capital asset (held for more than 24 months), TDS is deducted at 20% of the sale consideration plus applicable surcharge and cess. If the property is a short-term capital asset (held for 24 months or less), TDS is deducted at 30% of the total sale consideration plus surcharge and cess. The NRI seller can apply to the Income Tax Assessing Officer under Section 197 for a certificate permitting lower or nil deduction of TDS — this is appropriate where the actual capital gains tax liability (after indexation benefit on long-term gains, or after deduction of the cost of improvement and acquisition) is lower than the TDS that would otherwise be deducted on the full sale price.

Capital Gains Tax on NRI Property Sale

The NRI seller must file an Indian income tax return for the financial year in which the property is sold and pay capital gains tax. For long-term capital gains (property held more than 24 months), the applicable rate is 20% with indexation benefit — the cost of acquisition is inflated using the Cost Inflation Index published annually by the government. Capital gains exemptions are available: Section 54 permits reinvestment of gains in another residential property in India (within a defined timeframe) to claim exemption; Section 54EC permits investment of capital gains in specified bonds (National Highway Authority of India or Rural Electrification Corporation bonds, subject to a Rs. 50 lakh limit) within six months of the sale to claim exemption. These exemptions significantly reduce or eliminate tax liability on NRI property sales and should be planned before the sale proceeds.

FEMA Repatriation of Sale Proceeds

After the property sale is completed and taxes are paid, the NRI seller may repatriate the sale proceeds from their NRO (Non-Resident Ordinary) account in India to their overseas bank account. Repatriation of up to USD 1 million (or its equivalent in any freely convertible foreign currency) per financial year from the NRO account is permitted under the Foreign Exchange Management (Remittance of Assets) Regulations, 2016. The remittance requires: a certificate from a Chartered Accountant in Form 15CB confirming that applicable taxes have been paid and that the remittance is within the permissible limit; the NRI's self-declaration in Form 15CA filed electronically with the Income Tax Department; and the bank's own compliance checks. Where the property was originally acquired through foreign inward remittances (from an NRE account), documentary evidence of the foreign currency source allows the original investment amount to be repatriated separately, outside the USD 1 million annual limit.