4. DTAA Relief — Treaty Override
India has Double Taxation Avoidance Agreements (DTAAs) with over 90 countries. An NRI can invoke the applicable DTAA to reduce or eliminate Indian tax on property income or capital gains, provided the treaty permits it. Most DTAAs allocate taxing rights on immovable property income and capital gains to the country where the property is situated — i.e., India. The DTAA rarely eliminates Indian tax on NRI property entirely but may cap rates or affect computation.
4.1 Beneficial Provisions Override — Section 159(4)
Section 159(4) of ITA 2025 (old Section 90(2)) provides that where a DTAA applies to an NRI, the provisions of ITA 2025 shall apply only to the extent they are more beneficial to the assessee — the NRI can choose whichever of domestic law or treaty produces the lower tax outcome.
4.2 GAAR Override — Section 159(6)
Section 159(6) of ITA 2025 (old Section 90(2A)) provides that Chapter XI (General Anti-Avoidance Rules / GAAR) shall apply even if the DTAA provisions are more beneficial. Treaty-shopping structures — routing property ownership through an intermediate entity or jurisdiction to obtain treaty benefits — remain subject to GAAR challenge under Sections 161–167 (old Sections 95–102). Impermissible Avoidance Arrangements can be disregarded and treaty benefits denied.
4.3 TRC and Form 10F — Mandatory — Section 159(8)
Under Section 159(8) of ITA 2025 (old Section 90(4)), an NRI can claim DTAA relief only if: (a) a Tax Residency Certificate (TRC — Form 43 [old Form 10FB]) issued by the Government of the foreign country is obtained and furnished; and (b) Form 41 [old Form 10F] is filed online on the Income Tax e-Filing portal. Without these, the buyer or tenant must deduct TDS at the full domestic rate. The TRC must cover the relevant Tax Year.
4.4 Country-Wise DTAA Position on Immovable Property
| Country | Capital Gains — India's Taxing Right | Rental Income | Practical Position for NRI |
|---|---|---|---|
| USA | India has full taxing rights on immovable property (Capital Gains Article, India–USA DTAA) — 12.5% LTCG / slab STCG applies | India has full taxing rights — slab rate | No rate reduction. Claim credit in USA for Indian tax paid to avoid double taxation. |
| UAE | India has full taxing rights — domestic rate applies. No exemption even though UAE has no income tax. | India has full taxing rights | No DTAA rate reduction. Deemed Resident trap under Section 6(7) applies if Indian income > ₹15 lakh. |
| UK | India has full taxing rights on immovable property (Capital Gains Article, India–UK DTAA) | India has full taxing rights | Pay Indian rate; claim credit in UK under Article 24 (elimination of double taxation). |
| Canada | India has full taxing rights on immovable property (Capital Gains Article, India–Canada DTAA) | India has full taxing rights | Same as USA. Claim tax credit in Canada for Indian tax paid. |
| Singapore | India has full taxing rights on immovable property (Capital Gains Article, India–Singapore DTAA) | India has full taxing rights | No Indian tax reduction. Singapore generally exempts foreign-sourced income. |
| Mauritius | India has full taxing rights on immovable property (Capital Gains Article, India–Mauritius DTAA) — the pre-April 2017 Mauritius grandfathering applies only to shares/debentures acquired before 1 April 2017, not to immovable property | India has full taxing rights | No DTAA benefit for property. Domestic rates apply fully. |
| Germany | India has full taxing rights on immovable property (Capital Gains Article, India–Germany DTAA) | India has taxing rights; Germany may also tax and give credit | Pay Indian rate; claim credit in Germany for Indian tax paid. |
| Australia | India has full taxing rights on immovable property (Capital Gains Article, India–Australia DTAA) | India has full taxing rights | Pay Indian rate; claim foreign tax credit (FTC) in Australia. |
For immovable property in India, the DTAA almost never reduces the Indian tax rate — India retains full taxing rights under the Immovable Property and Capital Gains articles of virtually every Indian DTAA. The treaty benefit for the NRI operates in the country of residence — the NRI avoids double taxation by claiming a credit for Indian tax paid against the tax due in their home country. The TRC + Form 10F requirement under Section 159(8) must be fulfilled to confirm treaty eligibility. For Form 128 [old Form 13] / LDC applications, even if the treaty does not reduce the Indian rate, the TRC confirms residency and helps the AO compute an accurate LDC.
5. Repatriation of Sale Proceeds — FEMA & RBI Rules
Repatriation of property sale proceeds abroad is governed by FEMA, 1999 and RBI Master Direction — Remittance of Assets (2016) — entirely separate from income tax but critically linked in practice. The Income Tax compliance (TDS deduction, ITR filing, tax clearance) must be completed before the Authorised Dealer bank will permit remittance.
5.1 FEMA Repatriation Rules — Key Framework
Regulation 4: An NRI / PIO may remit an amount, not exceeding USD 1,000,000 (USD one million) per financial year, out of balances held in NRO account / proceeds of assets in India for bona fide purposes — subject to payment of applicable taxes. Regulation 6: Remittances out of sale proceeds of agricultural land, plantation property, or farmhouse in India are not permitted.
| Situation | FEMA Regulation | Repatriation Limit | Key Conditions |
|---|---|---|---|
| Property purchased as NRI using NRE / FCNR(B) account funds | Sch. 1 to FEMA 13(R)/2016-RB | Original NRE/FCNR investment amount: freely repatriable subject to 2-property limit. Capital gains / appreciation above original investment: repatriable within overall USD 1 million annual NRO limit after applicable taxes — not unlimited free repatriation. |
— Restricted to maximum 2 residential properties for repatriation of original investment — Additional amounts repatriable within USD 1 million limit via NRO route — Form 131 [old Form 16A] TDS certificate from buyer must be available — Form 145 [old Form 15CA] + Form 146 [old Form 15CB] mandatory before remittance [Sec. 397(3)(d), ITA 2025] |
| Property purchased using NRO account funds, inherited, or received as gift | Reg. 4, FEMA (Remittance of Assets) 2016 | USD 1 million per financial year (across all remittances from NRO account) |
— Payment of all applicable taxes mandatory — Form 146 [old Form 15CB] from practising CA certifying tax compliance — Form 145 [old Form 15CA] self-declaration filed online on income tax portal — CA certificate as per RBI format to be submitted to Authorised Dealer bank — Limit is aggregate — covers all NRO remittances in the financial year, not just property |
| Agricultural land / plantation property / farmhouse | Reg. 6, FEMA (Remittance of Assets) 2016 | Not repatriable |
— Proceeds must remain in NRO account in India — Can be used for local investments or expenses in India — No repatriation permitted even if all taxes are paid — Note: NRI cannot acquire agricultural land in India by purchase (only by inheritance) — Interest earned on NRO balance from these locked proceeds is taxable in India (TDS at 30% + cess by bank) but the net post-tax interest CAN be repatriated within the USD 1 million annual limit — it is only the original sale proceeds that cannot be repatriated. |
| Commercial property (office, shop, warehouse) | Reg. 4, FEMA (Remittance of Assets) 2016 | USD 1 million per financial year if purchased through NRO funds; Freely repatriable if through NRE/FCNR |
— Same conditions as residential property — Form 145 [old Form 15CA] + Form 146 [old Form 15CB] required — All taxes (TDS, capital gains) must be settled before remittance |
5.2 Form 145 [old Form 15CA] and Form 146 [old Form 15CB] — Income Tax Act, 2025
Before the Authorised Dealer bank will remit funds abroad, two mandatory filings are required under Section 397(3)(d) of ITA 2025 (old Section 195(6) of ITA 1961):
- Form 145 [old Form 15CA] — Self-declaration by the remitter (the NRI or the person making the remittance on behalf of the NRI), filed online on the Income Tax e-Filing portal. It certifies the nature of remittance, applicable tax provisions, and whether taxes have been deducted. Parts A, B, C, or D apply depending on the amount and whether a certificate from a CA or AO has been obtained.
- Form 146 [old Form 15CB] — Certificate from a practising Chartered Accountant, certifying that: the applicable taxes have been paid / deducted; the remittance is in accordance with FEMA provisions; and the income tax provisions applicable to the transaction have been complied with. Form 112 must be obtained before filing Form 111 (Part C) for remittances exceeding ₹5 lakh where no AO certificate under Section 395 (old 197) is available.
Form 146 [old Form 15CB] is mandatory for remittances exceeding ₹5 lakh in a financial year to the same recipient where no Lower Deduction Certificate (Form 128 [old Form 13]) from the AO has been obtained. For remittances below ₹5 lakh where no CA certificate is required, Form 145 [old Form 15CA] Part A (self-declaration) is still required unless the remittance falls under a specified exempt category under Rule 37BB (now its ITA 2025 equivalent). The ₹5 lakh threshold governs whether Form 146 (CA certificate) is additionally needed — Form 145 is required for virtually all foreign remittances by NRIs. Given that NRI property sale proceeds typically far exceed ₹5 lakh, Form 146 [old Form 15CB] is practically always required in these transactions.
5.3 Sequence of Steps for Repatriation
- Ensure buyer deducts TDS under Section 393(2) [Table Sl. No. 17] — obtain Form 131 [old Form 16A] from buyer
- File ITR in India (Form ITR-2) claiming any applicable exemptions (Section 82, 85, 86) and computing actual tax liability
- Pay any balance tax due; obtain acknowledgement of ITR filing
- Engage a practising CA to issue Form 146 [old Form 15CB] certifying tax compliance
- File Form 145 [old Form 15CA] online on the Income Tax e-Filing portal (Part C, citing the Form 112 certificate)
- Submit Form 145 + Form 146 along with CA certificate in RBI format to the Authorised Dealer bank
- Bank remits proceeds to the NRI's foreign bank account
Frequently Asked Questions — DTAA & Repatriation
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