Are you an NRI and planning to invest in Real Estate in India?? Well, if it is so, time could not have been better for you to do so. All thanks to Indian Government for making it easy for a Non-Resident Indian to buy a property in India. While India’s Real Estate sector saw a price correction in the recent past, buying property in India has become more lucrative for NRIs.
If you are an NRI and planning to buy a property in India, here are a few things that you should keep in mind before investing:
Nature of property:
If you hold an NRI status and planning to buy a property in India you should know that you are eligible to buy all sorts of immovable property in India other than agricultural land, plantation property and farmhouse. However, one can also acquire agricultural land, farm house or plantation property in India by getting an approval from RBI and Indian Government for the same.
If you are planning to buy a property for investment purpose, one thing you should keep in mind is the investment period. A minimum of 3 years of investment is recommended as when an NRI sells a property within three years of its purchase, it will be treated as short-term capital gain and will attract TDS (tax deducted at source) at the rate of 30.9 percent. But, if the property is sold after a period of 3 years, it will be considered as long-term capital gains and attract TDS at the rate of 20.6 percent. However, the final taxation system is same for both, NRIs, as well as resident Indians and an NRI, can apply for a refund of TDS if a lower tax slab is applicable to him. An NRI also has an option to reduce the long-term capital gains tax by investing the proceeds of the old property into another property purchase.
Power of attorney (PoA):
The Government of India has provided another option to the NRIs to ease the process of property purchase. An NRI can give the PoA to his relatives or friends to complete the purchase process. You can keep the PoA general or specific about the rights that your representative can exercise in your absence.
The banks and housing finance companies registered with the National Housing Banks has received a notification from RBI to provide loans to the NRI’s for buying residential property in India. The loan amount will be sanctioned in the Indian currency and have to be repaid in the same currency. According to the regulations, the loan amount, however, cannot be credited directly to the bank account of the NRI. It has to be disbursed either to the developer’s account or to the seller’s account directly. The loan amount can be repaid through FCNR deposits or through the funds in NRI’s NRO or NRE account.
Repatriation of funds back to the foreign country:
The Government has issued certain guidelines for the repatriation of funds to an NRI. Below mentioned are the conditions on which an NRI or a PIO (Person of Indian Origin) may repatriate the proceeds from the sale of immovable property in India:
- All the FEMA directives applicable at the time of purchase of the property must have been followed.
- If the property was initially acquired out of the funds held in an FCNR (B) account or through foreign exchange remitted, the amount repatriated cannot exceed the original amount paid for the property.
However, in the certain conditions, the NRI/PIO may repatriate a maximum of $ 1 million per financial year. They are:
- If the property was purchased through the rupee source of funds out of the balance held in the NRO account.
- If the property has been acquired by the way of gift, the sale proceeds must be credited to an account and can be repatriated thereafter.
- If the property has been inherited from a resident Indian, funds may be repatriated on producing an undertaking by the NRI or PIO, a documentary evidence providing inheritance and a certificate of a practicing chartered accountant in the formats prescribed by CBDT.
- The repatriation of sale proceeds is restricted to less than or equal to two properties in case of a residential property.
In all other cases, the NRIs receive the same treatment as it is given to the Residential Indians.