‘Can OCI buy property in India?’ is one of the common questions that arise among OCIs. If you are an OCI and wondering about the same, then you are at the right place. This blog discusses the guidelines for Overseas Citizens of India (OCIs) regarding property ownership in India and the various tax implications for OCI buying property in India.
Can OCI Buy Property in India?
According to the regulations outlined by the FEMA, individuals holding an OCI card have the freedom to invest in both residential and commercial real estate. The guidelines explicitly state that there are no restrictions on the number of properties they can purchase.
Types of Properties OCIs can Buy in India
OCIs have the opportunity to invest in real estate, with the exception of certain property types. OCIs are not allowed to purchase:
- agricultural land,
- plantation property, or
However, there are no limitations on the number of residential or commercial properties that OCIs can own, as per income tax laws. If an OCI intends to acquire a plantation or farmhouse, they must seek approval from both the Reserve Bank of India (RBI) and the government.
Process of Buying Property as an OCI
- An Overseas Citizen of India (OCI) has the option to buy or receive a property in India.
- The payment for such purchases needs to be conducted within India using regular banking channels, and it is subject to applicable taxes, duties, and levies.
- The funds can be transferred through a bank transaction or sourced from an NRI bank account held by the OCI.
- However, note that it is not permissible to use traveler’s cheques or foreign currency for these transactions.
- Additionally, OCIs can explore the possibility of obtaining home loans from Indian banks that offer services to NRIs.
- Even though OCIs are distinct from NRIs, they enjoy the same privileges as NRIs when dealing with banks as OCI cardholders.
Documents Required for OCIs to Buy Property in India
When purchasing a property in India, Overseas Citizens of India (OCIs) are typically required to furnish several essential documents. These may include:
- OCI card
- PAN card
- Address verification documents, such as utility bills
- Work permit or employment contract
- Recent income tax forms
- Recent salary slips
- Passport-size photographs
- Bank statement for eligible NRI accounts
If the OCI holder is not present in India during the property purchase process, it may be necessary to provide a power of attorney. To ensure comprehensive information, it is advisable to consult with the bank, broker, or seller involved in the transaction for any additional documentation requirements.
Can OCI Buy Property in India without Aadhaar Card
According to Rule 114C, an Aadhaar card is not compulsory for OCIs when engaging in property transactions, such as buying or selling. An NRI with an Overseas Citizen of India (OCI) status can proceed with the transaction by having an NRO (Non-Residential Ordinary) account. Thus, an Aadhaar card is not deemed obligatory for OCIs. However, it is advisable to have your property documents reviewed by a legal expert as an additional precautionary measure to ensure utmost security and compliance.
OCI Buying Property in India: Tax Implications
Outlined below are the tax considerations for OCIs when purchasing property in India:
- The OCI is required to compute the Tax Deducted at Source (TDS) based on the residential status of the seller and the capital gains involved.
- If an OCI buys an immovable property in India from a resident and the sale consideration exceeds Rs 50 lakh, TDS must be deducted at a rate of 1%.
- When purchasing property from an NRI, TDS is deducted at a rate of 20% for long-term capital gains. For short-term capital gains, the TDS rate corresponds to the income tax slab rate applicable to the seller.
- Short-term capital gains arise when the property is sold within two years of purchase, while long-term capital gains occur when the property is sold after two years of ownership.
- It is crucial to ensure that the deducted tax is deposited within 30 days of such deduction. Failure to comply within this period can result in a penalty of 1% per month on the outstanding tax amount.
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