By S&S Co. Advocates & Solicitors · Published 10 August 2026 · Informational content, not legal advice — see our disclaimer
'Liquidation' Means Something Different for Every Asset Class
NRIs holding assets in India — a family property, an equity portfolio built up over years, matured fixed deposits, mutual fund holdings — often assume that 'selling everything and bringing the money home' is a single, uniform process. It is not. Real estate, listed securities, bank deposits and business interests each sit under a different compliance regime, with different tax withholding rules, different account requirements, and different repatriation limits under the Foreign Exchange Management Act, 1999 (FEMA). Treating them as interchangeable is the single most common reason NRI liquidation exercises get delayed by months.
The one constant across every asset class is that liquidation and repatriation are two separate steps, not one. Converting an asset into rupees is a domestic transaction governed largely by the Income Tax Act, 1961 and, where applicable, state property law. Moving those rupees out of India as foreign currency is a distinct, separately regulated transaction governed by FEMA and RBI directions, and it is this second step — not the sale itself — where most avoidable delays and errors actually occur.
Selling Property: TDS Under Section 195 and the Capital Gains Calculation
When an NRI sells immovable property in India, the buyer is legally obligated to deduct tax at source under Section 195 of the Income Tax Act before paying any part of the consideration — and this obligation exists regardless of whether the NRI actually owes that much tax once the transaction is finally assessed. For property held for more than 24 months (long-term capital gains), the buyer must withhold tax calculated on the applicable long-term capital gains rate plus surcharge and cess; for property held 24 months or less (short-term capital gains), withholding is at the NRI's applicable slab rate, which can run considerably higher. Critically, absent further action, this TDS is calculated on the full sale consideration, not merely the capital gain — a materially larger number for anyone who bought the property years ago at a much lower price.
This is precisely the gap that the Form 13 lower/nil-deduction certificate is designed to close. An NRI seller can apply to the jurisdictional Assessing Officer, before the sale closes, for a certificate authorising the buyer to deduct TDS only on the actual estimated capital gain rather than the gross sale price. Getting this certificate in hand before signing the sale deed is, in practical terms, the difference between a large chunk of sale proceeds being locked up with the tax department for a year awaiting a refund, and a liquidation that leaves usable cash in hand within weeks of closing. The buyer separately needs a Tax Deduction Account Number (TAN) to remit this TDS and file the corresponding return — a step buyers unfamiliar with NRI transactions sometimes overlook, which can itself stall the closing.
Depending on the seller's country of tax residence, the India–[country] Double Taxation Avoidance Agreement (DTAA) may also affect the final tax liability, and in some cases a tax residency certificate from the country of residence is needed to claim treaty relief. This is genuinely fact-specific and worth a dedicated conversation with a chartered accountant before, not after, the sale — retroactively claiming DTAA relief after tax has already been withheld and remitted is a materially harder and slower process than structuring for it up front.
Liquidating Financial Assets: Shares, Mutual Funds and Fixed Deposits
NRIs typically hold Indian equities through the Portfolio Investment Scheme (PIS) route via a designated bank, or, for many, through a standard demat account opened while still resident in India and subsequently redesignated to NRI status. Selling shares or mutual fund units triggers capital gains tax exactly as it would for a resident — short-term or long-term depending on the holding period — with the depository participant or mutual fund house typically deducting TDS at source on the gain at the time of redemption, similar in spirit to the Section 195 mechanism for property but administered through the securities intermediary rather than the buyer directly.
Fixed deposits present their own wrinkle. Interest earned on an NRO (Non-Resident Ordinary) fixed deposit is fully taxable in India and subject to TDS at a flat rate under Section 195, deducted by the bank at the time interest is credited or paid — there is no basic exemption threshold available to NRIs for this purpose. NRE (Non-Resident External) fixed deposit interest, by contrast, is tax-exempt in India for as long as the depositor genuinely retains NRI status, which is precisely why the account through which an asset was originally funded matters so much when the time comes to close it out.
Closing out a mutual fund portfolio or demat holding remotely is administratively straightforward once KYC is current — most fund houses and depositories now accept digitally executed redemption instructions — but NRIs frequently discover mid-transaction that their KYC has lapsed, their PAN is not linked correctly to their current NRI bank accounts, or their registered address and residency status on file are stale. Refreshing KYC and confirming NRI-status flags across every bank, demat and mutual fund relationship before initiating a liquidation exercise, rather than after a transaction gets stuck, saves weeks.
Where the Money Has to Go First: NRO vs. NRE Accounts
Almost all India-sourced liquidation proceeds — property sale consideration, dividends, interest, rental income, sale of shares held on a non-repatriable basis — must be credited to an NRO account, not an NRE account, and cannot be directly wired abroad from the point of sale. The NRO account is, by design, the collection point for India-sourced income and capital receipts; funds sitting in it are not automatically repatriable and require a specific compliance process (described below) before they can leave the country.
The NRE account serves a different function entirely: it holds foreign-earned money the NRI has chosen to remit into India, and NRE balances — principal and interest alike — are freely repatriable without the compliance layer that applies to NRO funds. The one meaningful exception that blurs this line is where a property was originally purchased using foreign exchange remitted through an NRE or FCNR account; in that specific case, the sale proceeds can be repatriated up to the original foreign-currency investment amount without being capped by the standard NRO repatriation limit discussed next — though this requires documentary proof tracing the original inbound remittance, which is worth preserving carefully at the time of purchase, not reconstructed years later at the point of sale.
Repatriating the Proceeds: The USD 1 Million Limit and Its Exceptions
Once liquidation proceeds are sitting in an NRO account, repatriating them abroad is governed by RBI's remittance framework, which permits an NRI to repatriate up to USD 1 million per financial year (April to March), cumulatively across all NRO accounts, subject to payment of applicable taxes and submission of the prescribed compliance certification. This USD 1 million ceiling is an aggregate annual limit across all NRO-sourced remittances that year, not a per-transaction or per-property limit — a distinction that matters considerably for anyone liquidating multiple assets in the same financial year and needing to sequence remittances across more than one year to stay within the cap.
For sale proceeds specifically arising from up to two residential properties (self-acquired or inherited), current RBI guidance permits repatriation of the full sale proceeds without being capped by the general USD 1 million ceiling, provided the underlying tax compliance is complete — though agricultural land sits under a materially more restrictive regime, generally confined within the standard USD 1 million annual limit and, in some circumstances, requiring specific RBI approval given long-standing restrictions on NRI ownership and disposal of agricultural land.
Every outward remittance from an NRO account requires certification confirming that applicable Indian taxes have been paid or provided for on the underlying income — historically filed as Form 15CA (self-declaration) accompanied, above certain thresholds, by Form 15CB (a chartered accountant's certificate). Following the enactment of the Income Tax Act, 2025 and its associated rules, the specific compliance forms governing remittances made on or after 1 April 2026 have been updated, and the exact current form numbers and thresholds should be confirmed with a chartered accountant at the time of remittance rather than assumed from older guidance — this is an area where the paperwork changes faster than general commentary keeps up, and using an outdated form is a common, entirely avoidable cause of a remittance being bounced back by the bank.
A Practical Sequencing Checklist for a Clean Liquidation
For NRIs managing a liquidation from abroad, the practical sequencing that avoids the most common delays looks roughly like this: confirm and refresh KYC across every bank, demat and mutual fund relationship first; if selling property, apply for the Section 195 Form 13 lower-deduction certificate before signing the sale deed, not after; execute a specific, well-drafted Power of Attorney in favour of a trusted representative in India if you cannot be present for signing, registration or possession handover, and have it properly notarised and, where required, apostilled or consularised depending on your country of residence; confirm the buyer has a valid TAN before closing; ensure sale proceeds land in an NRO account, not directly abroad; and engage a chartered accountant early to handle the Form 15CA/15CB (or successor) certification and to sequence multiple remittances across financial years if the total liquidation value will exceed the annual repatriation limit in a single year.
The single most expensive mistake in this process is sequencing failure — selling first and only then asking a tax advisor how to get the money out, by which point the TDS has already been deducted on the gross sale price rather than the net gain, and the funds are sitting in an NRO account with no certification in place to move them. Every step above is manageable and routine when done in the right order; done out of order, each one becomes a source of months of delay.
Frequently Asked Questions
Can I repatriate more than USD 1 million from India in a single financial year?
Generally no, from NRO account balances — USD 1 million per financial year is the standard RBI ceiling, aggregated across all NRO accounts. The principal exceptions are NRE account balances (freely repatriable, no cap) and sale proceeds of up to two residential properties originally purchased with NRE/FCNR foreign exchange, repatriable up to the original investment amount outside the general cap. Liquidations exceeding the annual limit typically need to be sequenced across more than one financial year.
Do I need to pay tax both in India and in my country of residence?
Potentially, but India's Double Taxation Avoidance Agreements (DTAAs) with most countries where NRIs reside are specifically designed to prevent the same income being taxed twice in full — typically through a tax credit mechanism in the country of residence for tax already paid in India, or an exemption method depending on the specific treaty. The applicable relief depends entirely on your specific country's DTAA with India and should be confirmed with a cross-border tax advisor before the transaction, not after.
Can I appoint someone to sell my property in India while I remain abroad?
Yes — a specific, registered Power of Attorney authorising a trusted representative to sign the sale deed, present documents for registration, and hand over possession is the standard route for NRIs who cannot be physically present. The POA should be drafted specifically for the transaction (a general, open-ended POA invites both fraud risk and registration scrutiny), and it typically needs to be notarised and then apostilled or attested at the Indian consulate, depending on your country of residence, before it will be accepted for registration in India.
What happens if the buyer deducts TDS incorrectly or doesn't deduct it at all?
If TDS is deducted at the wrong rate or on the wrong base (gross consideration instead of the Form 13-certified gain, for instance), the remedy is generally to claim the excess as a refund when filing the NRI's Indian income tax return for that year — which works, but ties up cash for a year or more. If the buyer fails to deduct TDS altogether, the compliance liability and potential penalty exposure falls primarily on the buyer, not the NRI seller, but it can still stall or complicate the transaction and any later remittance certification, since certifying tax compliance for a Form 15CA/15CB (or successor) becomes difficult without evidence the correct TDS was actually deposited.
Does it matter that I no longer hold Indian citizenship?
For FEMA and repatriation purposes, what matters is residential status under FEMA (an objective test based on where you actually reside and for how long), not citizenship — a foreign citizen of Indian origin (OCI/PIO) is generally treated the same way as an NRI for these specific asset-liquidation and repatriation rules, though there are some category-specific distinctions (particularly around agricultural land and certain categories of property) worth confirming for your specific status before a transaction, since 'NRI' and 'OCI' are not always treated identically across every FEMA provision.
References & Further Reading
This article references the following statutes, rules and judicial decisions. Case citations link to the fuller discussion in our Legal Updates archive, verified against primary sources at the time of writing.
- Income Tax Act, 1961 — Section 195 (TDS on payments to non-residents) and Section 197/Form 13 (lower or nil deduction certificate).
- Foreign Exchange Management Act, 1999 and associated RBI Master Direction on Remittance of Assets, governing NRO repatriation limits and the USD 1 million annual ceiling.
- FEMA (Acquisition and Transfer of Immovable Property in India) Regulations — property-specific repatriation rules, including the residential-property and foreign-currency-funded-purchase exceptions.
- Income Tax Act, 2025 and Income Tax Rules, 2026 — updated outward remittance certification framework applicable to remittances made on or after 1 April 2026, superseding the earlier Form 15CA/15CB regime under the 1961 Act.
- Reserve Bank of India — Master Direction on Non-Resident Ordinary (NRO) and Non-Resident External (NRE) Accounts, governing which accounts must receive which categories of India-sourced funds.