Selling Property in Kerala as an NRI — Complete Legal Guide

Title Verification Before Sale

Before any sale proceeds, the seller must verify title. An Encumbrance Certificate from the Sub-Registrar's office covering the preceding thirty years reveals every registered transaction against the property — sale deeds, mortgages, charges, leases, gifts and court orders. It must be obtained and reviewed by an advocate in Kerala before the sale. If the property is mortgaged, the mortgage must be discharged before or at the sale. Where ancestral property is sold, the legal heirs of every deceased owner in the title chain must be identified and their shares accounted for — a legal heir who has neither released nor consented can challenge the sale later. The search also reveals any Kerala Land Reforms ceiling restriction or other encumbrance.

Power of Attorney — Execution from Abroad

An NRI who cannot travel must execute a Power of Attorney in favour of a trusted representative to conduct the sale. It must be a specific PoA, not a general one, authorising execution and registration of the sale deed for described property at a stated or negotiated consideration. Method depends on the country of residence. In Hague Apostille Convention states — the UK, USA, Australia, Germany, France and most of Europe — the PoA is executed before a notary and apostilled by the designated authority. In non-Apostille states, including the UAE and other Gulf countries, it is executed before the Indian Consulate or Embassy. On receipt in India the PoA is adjudicated for stamp duty and, where it relates to immovable property, registered at the Sub-Registrar's office under Section 17 of the Registration Act, 1908.

TDS on the Sale — Section 393(2) of the Income-tax Act, 2025

The buyer is obligated under Section 393(2) of the Income-tax Act, 2025 (corresponding to Section 195 of the repealed Income-tax Act, 1961 for periods before 1 April 2026) to deduct TDS before paying the NRI, whether the buyer is resident or another NRI. The rate turns on the holding period. For a long-term capital asset held more than 24 months, TDS is 12.5% plus surcharge and health and education cess — a maximum effective rate of 14.95%. For a short-term asset held 24 months or less, TDS is at applicable slab rates, up to 30% at the highest slab, plus surcharge and cess. The seller may apply to the Assessing Officer under Section 395(1) (formerly Section 197) in Form No. 128 (formerly Form 13) for a lower or nil deduction certificate where actual liability is lower than the deduction would otherwise be.

Section 393(2) charges tax on the income chargeable to tax — the capital gain itself, not the gross consideration. In practice buyers deduct on the full consideration because they cannot verify the cost of acquisition. If a property sells for ₹1 crore and was bought for ₹80 lakh, TDS at 12.5% on the full consideration is ₹12.5 lakh, whereas the tax on the ₹20 lakh gain at 12.5% is ₹2.5 lakh. A lower deduction certificate in Form No. 128 aligns the deduction with actual liability and avoids a prolonged refund. The buyer deposits TDS via Challan 281 by the 7th of the following month, files the quarterly return in Form No. 144 (formerly Form 27Q), and issues Form No. 131 (formerly Form 16A) to the seller within fifteen days of the return due date.

Form 16B does not apply to a non-resident seller. That certificate belongs to the resident-to-resident route. Where the seller is an NRI, the certificate is Form No. 131.

Capital Gains — Rate, Indexation and Exemptions

The seller files an Indian income tax return for the year of sale and pays capital gains tax. On property held more than 24 months, the long-term rate under the Income-tax Act, 2025 is 12.5% without indexation. The Finance (No. 2) Act, 2024, with effect from 23 July 2024, removed the indexation benefit on property.

Indexation is not available to a non-resident seller. The grandfathering election — allowing resident individuals and Hindu undivided families holding property acquired before 23 July 2024 to choose between 20% with indexation and 12.5% without — does not extend to non-residents. An NRI seller is charged at 12.5% on the gain regardless of acquisition date.

Reinvestment reliefs remain available. Section 54 exempts long-term gains reinvested in one residential property in India within two years after the sale, one year before, or constructed within three years; the property must be in India. Section 54EC exempts gains up to ₹50 lakh invested in specified NHAI or REC bonds within six months, held for five years. Section 54F applies where the asset sold is not a residential house, exempting the whole net consideration reinvested in one Indian residential property, subject to the seller not owning more than one other residential house.

Reinvestment reliefs are given here under Income-tax Act, 1961 numbering. Sections 54, 54EC and 54F are stated pending verification of their Income-tax Act, 2025 equivalents against the Bare Act.

FEMA Repatriation of Sale Proceeds

After the sale completes and taxes are paid, the seller may repatriate proceeds from the NRO account to an overseas account. Repatriation of up to USD 1 million (or equivalent in any freely convertible currency) per financial year from the NRO account is permitted under the Foreign Exchange Management (Remittance of Assets) Regulations, 2016. The remittance requires a Chartered Accountant's certificate in Form No. 146 (formerly Form 15CB) confirming that applicable taxes are paid and the remittance is within the permissible limit, and the remitter's declaration in Form No. 145 (formerly Form 15CA) filed electronically — both under Rule 220 of the Income-tax Rules, 2026 and Section 397(3)(d) of the Income-tax Act, 2025 — together with the bank's own checks. Where the property was originally acquired through foreign inward remittances, documentary evidence of the foreign currency source allows the original investment to be repatriated separately, outside the USD 1 million limit.