8 Things To Remember While NRIs Buying Property in India
If you are a non-resident Indian and plan to buy a property of your own, you must follow some steps to stay away from all the troubles. The situation of India’s real estate sector has seen a high rise in the recent past. It has also become lucrative to buy a property in India because the currency rates have become more favourable.
The Foreign Exchange Management Act (FEMA) has allowed Indian citizens residing outside the country to invest in Indian real estate. You can buy all types of property, including agricultural land, plantation property, or a farmhouse. The liability and taxes for NRIs are different. The property price also depends on whether you buy the property for self-use, rental, or investment.
Things to Remember while NRIs buying property in India
If you are an NRI buying property in India, you must keep some things in mind. You must be aware of all the property rules and regulations for the NRIs who are buying a property. You can buy several properties in India. However, the tax liability will be different according to the nature of the property. Here are 8 important things that you must remember before signing the deal to buy a property in India as an NRI.
1. Nature of Property
NRIs are eligible to buy all types of properties in India. They are not allowed to buy any agricultural land, farmhouse, or other kinds of plantation property in normal cases. If you want to acquire agricultural land or a farmhouse in India, you are bound to get approval from the RBI and the government.
When an NRI is selling a property in India, then the TDS (Tax Deducted at Source) calculation will be calculated at the rate of 20.6 percent. This will be done based on long-term capital gains. The amount of 30.9 percent will be applied to the short-term capital gains. The final taxation rate will be similar to the NRIs of the local Indians. If an NRI has a lower tax slab, he can apply for a refund of the TDS.
3. Number of Properties NRIs Can Buy
There is no restriction on buying the number of properties as an NRI in India. It is important to consider that the property is purchased for their personal use or
investment. New flats for sale in India are a great investment as you can gain high rents monthly by renting them out.
4. Taking Home Loan
The RBI has permitted banks and housing finance companies to register with the National Housing Bank. They provide loans to NRIs and allow them to buy a residential property in India. The loan has to be repaid using the Indian currency. The loan amount will be decided according to the regulations.
It is not allowed to credit the loan to the bank account of an NRI. The money will be disbursed to the seller’s or the developer’s account. The loan can also be repaid by using the NRI’s NRO/NRE account funds or FCNR deposits.
5. Power of Attorney
As NRIs reside outside India, they have an option to give a power of attorney to their friends or relatives. However, these relatives must be residing in India so you can complete the process of purchasing the property. NRIs can use general or specific rights when it comes to power of attorney. The representative you choose can make use of these rights according to their requirement.
6. Tax Liability (Self-Use VS Rental Income)
If you are an NRI and want to purchase a property in India, the first thing that comes to your mind is tax liability. Does the question arise of whether the tax liability will be different if you invest in a co-working or co-living space?
When you purchase a property for commercial purposes, a bigger tax will be imposed than a residential property. According to the income-Tax act, it happens because of beneficial provision. If you purchase a house for self-use, the notional rent will be Nil.
When the property is purchased for commercial purposes, the rental income will be in the hands of the NRI itself. The taxes imposed on the rental income will be the same as mentioned above.
7. Repatriation of Funds
Being an NRI, you have to follow several guidelines when it comes to the repatriation of funds. The NRI and the person residing in India will have to follow the same process to sell their property. Here are some conditions mentioned below:
● You need to purchase the property keeping in mind the FEMA directives. This applies during the time you purchase it.
● No matter how much the repatriated amount, it will not exceed what you paid while purchasing the property.
● The property can be purchased in foreign exchange or with the assistance of banking channels or with the funds in your FCNR account
However, in some circumstances, the NRI may have to repatriate around 1 million each year:
● If you get a property as a gift, the proceedings related to sales will be handled with an NRO account
● In many cases, the property is inherited from the Indian resident itself. The funds will be repatriated with the help of a comprehensive document.
● When the NRI is from Bangladesh, Srilanka, or China, they need RBI approval.
8. Return on Investment
If you are an NRI and want to purchase a property in India, you need to consider some important things. The new flats for sale in Chennai are available at affordable rates.
If we talk about the return on investment, it will differ according to the property type. The luxury and ultra-luxury residential property can offer around 3-5% ROI. Most of the commercial properties will yield around 10-12% ROI.
Purchasing a new property in India can be challenging for the NRIs. However, if you keep the points mentioned above in mind, you will find it easy to handle. There are no restrictions on the number of commercial or residential properties that an NRI can purchase. If you are an NRI and looking for professional assistance from a trusted company, contact us to purchase, invest or sell all types of properties in India.