Whatever be the state of the politics or society in a country, real estate investing has a potential attraction element that doesn’t get lowered in the long run. This is something that is of immense interest to NRIs too. India evokes great interest for property investment. The same logic applies to the NRIs too.
But NRIs often get confused on how to buy property and what their gains could be.
While real estate investing in India is gaining interest there are somethings NRIs have to keep in mind. They don’t need RBI’s permission to invest in India. They just need passport, address proof, PAN Card and photographs to make an investment. The NRIs cannot invest in Agricultural, Plantation and Farmland Property.
The rules or the ways of investing in property are not always crystal clear to the overseas citizens. Moreover, they are never too sure about how profitable this investment can be for them.
NRIs are individuals who have been residing in another country for a consecutive 180 days and hold an Indian passport. So what property can the NRIs invest in?
Agricultural, Plantation or Farmland property is not permitted for NRI investment.
NRIs needn’t take permission from RBI for this.
Their passports, address proof, a PAN card, and photographs are required for this.
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How do NRIs finance the buying of property?
- They can issue cheques from their NRE or NRO accounts.
- If they have any deposits in their Foreign Currency Non-Resident Accounts ( FCNR), they can buy property using these funds too.
- Overseas currency brought to India through the legal bank channels.
What does one keep in mind about the POA?
More often than not, NRIs find it tough to travel again and again to India. They are on the lookout usually, for somebody who can handle their property matters so that it becomes convenient for them.
In these situations, they give a power of attorney to some relative or friend who can sign the real estate investment contracts on their behalf. Any POA that is made must be signed in the presence of either a notary or a consulate officer.
Repatriation and Taxation
- Repatriation implies the funds that are sent abroad after a transaction takes place – sale proceeds from the property sale.
- This would entail converting the Indian rupee to foreign currencies.
- Taxes aren’t supposed to be paid unless there is a rental income involved.
- If the property is sold, then a capital gains tax would be applicable. This could be short term or long term one.
- The tax is short term if the property is sold on a profitable basis within three years of buying. The tax is imposed on the seller according to the income tax slab rates.
- If the property is sold after three years, then long term capital gain is applicable.
- In cases where a new property is bought within a specific number of years, then tax is waived off.
Rental Income Taxation
- Rental Income is, of course, taxable. Appropriate taxes are to be paid using the PAN details.
- In cases where the NRI owns two or more properties then only one would be taken as rented property. Then taxes would have to be paid on that particular property only.
- But it needs to be remembered that just like other Indians, NRIs can also show 30% of their rental income as maintenance costs.
- However, tax doesn’t have to be paid on the income in the resident country of the NRI – though it is better to declare the income in the resident country.
Loans and the related tax benefits
NRIs can obtain home loans. There are a variety of products depending on the special needs of NRIs – whether it is investing in property such as buying a house or even building a house or anything more. Most Indian banks offer speedy and convenient tracking of loan applications.
It is crucial for NRIs to fully comprehend the financial scenario of the country before they decide to invest in property. Real estate investing requires astute business acumen and awareness about the legalities involved. More on these details, in the forthcoming blogs.