An NRI has his short stay in India exceeding 60 days in a financial year year nearing 365 days in a span of 4 years. Yet, they continue to have the privilege of owning a home in their mother country as much as a resident Indian. The property purchasing journey too is equally hassle-free. With just a little dose of knowledge on the regulations applicable for NRI buying property in India, you could proceed with a worry-free purchase.
#1: Choice of property for NRI buying property in India:
For long, the scenario has been that the NRI clients showing interest in buying immovable property in India will have to obtain permission from RBI. These are for Foreign Exchange Management Act (FEMA) purposes. But now, with newer provisions, an NRI could buy a home in the mother country without any hindrances. RBI has issued a notification granting general permission facilitating an NRI buying property in India, without the intimation for a request of the permission.
#Properties that an NRI can acquire:
- Residential Properties
- Commercial Properties etc.
#Properties that an NRI cannot acquire:
- Agricultural Properties
- Farmhouses etc.
#Number of Properties permissible:
- Any number of properties could be opted by an NRI buying property in India.
- An NRI can purchase a property jointly with an NRI or a resident Indian.
- A person not allowed to invest in a property in India cannot become a joint holder.
#Power Of Attorney:
- The Power of Attorney for the property purchased by NRI could be their friends or relatives in India.
- The rights that your representative can exercise could be generic or specific.
#2: Financial Aid for NRI buying property in India:
Getting the aid of home loans for building your home is as achievable as the visible degree of complexity. Yes, an NRI can get financial help just like any other resident, with the only change being that these are certain limits to be considered.
#Home loans applicable:
An NRI buying property in India could avail home loans from banks and financial companies registered with National Housing Bank.
#Home Loan procedure:
- The Home loan amount could not undergo direct transfer to the NRI account.
- It will be sanctioned directly to the seller’s account.
- The loan has to be repaid in the same currency upon which it is brought. (INR)
- Repayment could be processed with the NRO/NRE account of the NRI. FCNR deposits could also be used.
- There is no upper limit for deduction in home loan interest.
- Still, deductions such as Stamp duty, Registration charges, Yearly Municipal taxes paid and a 30% rent deduction (for maintenance) are applicable.
#3: Tax Regulations for NRI buying property in India:
Investments made on the immovable property could benefit both in the way of rent or capital gains. Both of these incomes are taxable at different taxes pertaining to their specifications.
#Taxation on the property:
While the final taxation rate is similar to resident Indians, the TDS (Tax Deduced at Source) is calculated at the rate of 30.9% and 20.6% on short term and long term capital gains respectively. (A long term capital asset is an immovable property held for more than 24 months).
Purchase of a property worth 50 lakhs or more-
- A withholding TDS at the rate of 1% is applicable.
Vacant property declared ‘self-occupied’ –
- The wealth tax is exempted.
Subsequent vacant properties-
- A tax at the rate of 1% is applicable.
Subsequent properties where only one property is shown as ‘self-occupied’-
- They will be deemed as let-out properties and add to the taxable income.
Properties rented out in India-
- The returns will have to be filed by the NRI buying property in India.
#What if you have a lower tax slab applicable?
Apply for a refund of the TDS by filing income tax returns.
#4: Repatriation of funds for NRI buying property in India:
Take a look at the fund repatriation conditions well ahead of time. Keep in mind the important aspects right from the beginning stages. With the sale of immovable property, an NRI buying property in India could repatriate the proceeds with the conditions mentioned below:
- The property must be in accordance with FEMA directives.
Case 1: Property Inherited from Residential Indian
- Funds should be repatriated with inheritance proof
- Documentary evidence
- An undertaking by the NRI/PIO
- A certificate from an authorized Chartered Accountant.
Case 2: Property acquired in foreign exchange
- Remitted through normal banking channels or out of funds held in an FCNR (B) account. The amount repatriated shouldn’t exceed the original amount paid with the purchase.
Case 3: Property acquired as a gift
- Sale proceeds should to credited to an NRO account before being repatriated.
Case 4: Residential Properties
- Repatriation of sale proceeds has to be lesser than equal to 2.
Case 5: Property inherited from a person outside India
- An NRI could repatriate sale proceeds only after approval from RBI.
Thus, while the case of an NRI buying property in India is in hand, the process is not entirely contrasting to that of a resident Indian. Keeping in mind the above set of conditions throughout the property purchase phase would help in simplifying the entire process.
Getting your home in your home country could be effortlessly easy from now on.
AUTHOR PROFILE Akshaya Muralikumar is an avid architect turned writer who strives to explore the depth of details in the subjects across Construction, Architecture, Interior Design and Marketing. Being "An Architect of thoughts" she has been 'building' her thoughts across multiple web and print media.