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Depositing sale proceeds in NRE account

I am planning to sell a residential property next month in Guntur and I am likely to receive a sizeable amount. I have both a Non-Resident (Ordinary) Account and a Non-Resident (External) Account with a bank in India. Is it possible for me to deposit the sale proceeds in my NRE account and repatriate the same to the Gulf?

C Unnikrishnan, Dubai

The sale proceeds of a residential property in India cannot be directly deposited in the Non-Resident (External) Account. The proceeds should be first deposited in the Non-Resident (Ordinary) Account. Thereafter, the capital gains tax should be paid. After paying the tax and obtaining a certificate of such payment from your chartered accountant, the net amount can be transferred to your Non-Resident (External) Account.

Transfer of rupee funds from NRO account to NRE account was not permissible until 7^th May, 2012. With effect from this date, such transfer is permissible provided it is within the limit of $1 million per financial year. Such transfer is permitted only after payment of applicable taxes where sale proceeds of assets are to be transferred.

The writer is a practicing lawyer, specialising in tax and exchange management laws of India.