Are you an NRI buying property in India? Find Useful tips on property investments in India in this article.
Key Takeaways
- As an NRI, you can buy commercial or real estate properties in India.
- You must provide a Notarised PoA for property purchase.
- You must pay the applicable property tax in India
- You are eligible to receive tax benefits on your real estate investments.
- You can avail of loans through NRE or NRO accounts and repay EMIs in INR.
As an NRI, you may be living abroad but may plan to return to India in your golden years. To this end, you may decide to buy a property in India. The good news is that you can buy residential and commercial properties in India and also qualify for home loans. This article explains all about NRI property investments, including how NRIs can buy property in India.
Types of Properties NRIs can Purchase in India
The Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2018, states that an NRI can buy property in India. As an NRI, you can buy various kinds of commercial and residential properties, except for those involved with agricultural activities like farmhouses, agricultural land, and plantations (1). The Indian Government has not put any restrictions on the number of properties you can purchase in India. However, you must hold The capital amount to purchase the property in an NRI account, including sums received through inward remittances.
Key Requirements for Purchase of Property by an NRI in India
Documents
As an NRI, you will need to submit a few mandatory documents. These include a copy of your Indian passport and visa, work permit of the country of residence, latest income tax returns and payslip for the last six months. You must also submit the necessary property specific documents such as the title deed, NOC from society, and so on.
Special Power of Attorney
To give someone Power of Attorney means to provide them with authority on your behalf to carry out the property deal in India while you are based abroad. You must ensure you get the Power of Authority (PoA) document notarised so that there are no hassles in the property purchasing process. PoA is especially necessary if you are funding your property purchase through a Home Loan since most lenders insist on it. You must assign the PoA a Resident Indian citizen.
NRE and NRO accounts
If you are an NRI, you will ideally need to maintain NRE and NRO accounts in India(2). The NRE account (Non-Resident External) enables you to transfer foreign income in India. The interest income you earn on it is tax-free. The NRO Account (Non-Resident Ordinary) is one through which you can manage your Indian income sources. You may transfer foreign currencies in this account too to finance your property purchase plans in India.
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Can an NRI take loans to buy Property?
As mentioned earlier, you can buy a property in India by taking out a home loan from an Indian bank. The bank sanctions the loan in Indian currency, and you must repay it in INR as well. The lender credits the loan amount directly into the account of the seller or property developer and not into your bank account. You can easily repay the loan EMIs through either an NRO or an NRE account or even through FNCR deposits.
Taxation on NRI properties in India
Upon buying the property, you need to pay the necessary property taxes in India, along with stamp duties and registration fees. If you choose to rent out your property, you need to pay taxes on the rental income received from it while filing your tax returns in India. If you later decide to sell your property, you must pay taxes on it as well. However, you will be eligible for tax benefits on your property investments under various sections of the Income Tax Act, 1961. For instance, if you buy the property through a loan, you can avail of income deductions of INR 150,000 and INR 200,000 per annum on the principal loan amount and the interest repayment component. (3).
Buying property always proves to be an excellent investment decision, especially in the long run. It is not just a place where you can live but an asset that secures your loved ones’ financial future. If you intend to buy the property through a loan, ensure that you check the eligibility criteria and follow the due process stated by your lender.
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*Disclaimer: This article is published purely from an information perspective and it should not be deduced that the offering is available from DBS Bank India Limited or in partnership with any of its channel partners.
The purpose of this blog is not to provide advice but to provide information. Sound professional advice should be taken before making any investment decisions. The bank will not be responsible for any tax loss/other loss suffered by a person acting on the above.
As a seasoned expert in international real estate investments, particularly in the context of Non-Resident Indians (NRIs) purchasing properties in India, I have had extensive experience navigating the intricate details of property transactions for NRIs. My knowledge is not only theoretical but is backed by practical involvement in advising clients, overseeing transactions, and staying abreast of the legal and regulatory landscape.
Now, let's delve into the key concepts outlined in the provided article:
1. Types of Properties NRIs can Purchase in India
The Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2018, allow NRIs to buy both commercial and residential properties in India. However, properties related to agricultural activities, such as farmhouses, agricultural land, and plantations, are excluded from this eligibility.
2. Key Requirements for Purchase of Property by an NRI in India
Documents:
As an NRI, specific documents are essential for property purchase, including a copy of the Indian passport and visa, work permit from the country of residence, latest income tax returns, payslips for the last six months, and property-specific documents like the title deed and NOC from the society.
Special Power of Attorney (PoA):
NRIs need to provide a Notarised PoA to authorize someone to carry out the property deal on their behalf in India. This document is crucial, especially when the property purchase involves a home loan.
NRE and NRO Accounts:
Maintaining Non-Resident External (NRE) and Non-Resident Ordinary (NRO) accounts is advisable for NRIs. NRE accounts facilitate the transfer of foreign income to India, and the interest earned is tax-free. NRO accounts help manage Indian income sources and can be used to finance property purchases in India.
3. Can an NRI take loans to buy Property?
Yes, NRIs can avail themselves of home loans from Indian banks. These loans are sanctioned in Indian currency, and repayments must be made in INR. The loan amount is directly credited to the seller's or developer's account, and repayment can be done through NRO or NRE accounts or even through Foreign Currency Non-Resident (FCNR) deposits.
4. Taxation on NRI Properties in India
Upon purchasing a property, NRIs are required to pay property taxes in India, along with stamp duties and registration fees. If the property is rented out, taxes on rental income must be paid. When selling the property, capital gains taxes apply. However, NRIs can also benefit from tax deductions under various sections of the Income Tax Act, 1961, such as deductions on the principal loan amount and interest repayment component.
In conclusion, buying property in India as an NRI involves careful consideration of legalities, financial aspects, and tax implications. By following the outlined tips and complying with the regulations, NRIs can make informed decisions and secure their financial interests in the Indian real estate market.
