Many NRIs have or plan to have residential property in India. Many rent out these properties while they are abroad. In this article we will first explain the laws regarding rent and their impact on taxation. Next, we talk about investing rental earnings in order to optimize NRI rental income in India.
Real Estate is one of the top investment tools for NRIs in India. It can be a form of retirement abode or an asset to bind the funds in. With the historical trend of immense growth and expansion, Real Estate has carved a separate niche for NRIs. Although, we need to understand that investing in Real Estate for an NRI is different when compared to a Resident India. Let’s see how:
What properties can NRIs buy in India?
NRIs can buy both residential and commercial properties in India. However, they can not buy any Agricultural Land, Farm House or Plantation property. They can only be inherited or received as gifts.
How can NRIs invest in Real Estate in India?
NRIs can invest in the real estate properties allowed to them through the following mediums:
- Self-Transactions using:
- Funds in their NRE/NRO/FCNR (B) accounts in India
- Funds remitted to India from overseas (in own account; can’t pay to the seller directly)
- Loan Facility (in INR) in India for NRIs; up to 80% of the property value based on individual eligibility of the NRI than can be repaid through:
- Inward Remittance (money transferred into your own account from abroad)
- Funds in their NRE/NRO/FCNR (Bank) accounts in India
- Rent from the purchased property
- Close Relatives crediting the borrower’s loan account (under section 6 of the Companies Act, 1956)
Note: No payments can be made by traveller’s cheque (pre-paid, pre-printed fixed amount cheques for payments across countries) or in foreign currency notes. All payments must be made in India only.
Why invest in Real Estate in India?
NRIs prefer to invest in Real Estate in India because of the following reasons:
- Rental income: A real estate property in India can fetch a very handsome rental income if the property is set in a well established neighborhood. An important point to note here though is that the rent is liable for TDS (Tax Deducted at Source) and the tenant will deduct 31.2% of the rent as tax before sending it to you. In Spite of that, it’s a fair deal and rental income can bring in sizable profits
- Price benefits and Long term Returns: The Real Estate industry in India appreciates at a rate of 19.5% per year (CAGR 2017-18; Source: IBEF). So, the investment value will multiply exponentially with time and it can be easily labelled as a very fruitful investment. Also, The Real estate sector in India is expected to reach a market size of US$ 1 trillion by 2030 (Source: IBEF). The investment that you put in today will bring in multifold profits in the longer run
- Retirement Plan: Reverse Mortgage (A type of loan where people over 62 years of age with considerable home equity can borrow money against the value of their home as a lump sum, fixed monthly payment or line of credit.) is gearing up in India. So, NRIs can invest in property and use it as a source of income post their retirement
- Tax Exemption: NRIs, if you buy property on loan in India, you can claim an exemption on the interest you pay for your home loan (section 24). Under section 80C, you can claim an exemption on the repayment of the principal amount. Also, there are ways to save taxes on Capital Gains from selling out the property in India and much more. (For Tax Advisory: write to us at [email protected])
Taxation on Real Estate for NRI
Taxation on Real Estate is a bit complex. It can be further subdivided into rent and capital gains. Along with that, TDS on buying a property is also a very essential instrument that must be deducted and paid to the government authorities.
1. TDS while buying property: Deduct TDS as per the table below while buying property in India keeping in mind the associated conditions.
Property Bought From
|Condition||Tax deducted at source|
|Resident||50 Lakhs or above|
1% TDS of Purchase Value
20% plus surcharge and cess for long term gains and 30% plus surcharge and cess for short-term gains
2. Income from Rent: Rent from property owned by an NRI is subject to a TDS of 30% to be deducted by the tenant. The rent received after the deduction of TDS is added to the total income of the NRI and is applicable for tax according to the Tax Slab of the NRI. NRIs can also choose to pay taxes themselves and file the returns. However, there are certain deductions that must be considered: Municipal Taxes paid, standard deduction of 30% on taxable value, deduction for interest on any loan taken for the property, repayment of principal amount of home loan up to Rs.1,50,000/-.
3. Capital Gains Tax for NRI on sale of Property: The minimum holding period for long term capital gains for real estate is 2 years.
Nature of gains
|Tax Liable||Tax Deducted at Source (TDS)|
|Short Term Capital Gains||As per tax slab|
Long Term Capital Gains
20% (plus surcharge and cess) with indexation
4. Taxation on Multiple Properties: If NRI owns more than one residential property which are self-occupied, then only one of the houses will be treated as self-occupied and all others will be treated as deemed to be let out. In such cases, a notional rent is computed and offered to tax as if the property was rented out
Investment is the buying of securities, real estate and other items in order to obtain capital gains or income. Investors purchase assets that rise in value over time and then provide returns as income payments or capital gains. As a person goes about investing, they will notice that certain terms get used frequently. We are going to explain the terms stocks, shares, stakes and fractions in order to make this process simpler.
There have been some major lifestyle changes over the past few years. COVID-19 has caused many more to work from home than before. The question of the demand for office space and its popularity in light of recent trends, is a natural one. The quarter end numbers of 2021 prove that the best locations all over India are in high demand for Grade A office space. Offices are irreplaceable because of the space they provide for interpersonal learning. It is impossible for this to be substituted by work from home alone. The demand for office space in Bangalore is one of the highest in India. This article talks about prime Bangalore office locations for CRE investment.
When people have funds to spare, they start to think about investing. Some normal questions that arise are where to invest, how fruitful it will prove and how safe it is to invest in a particular area. Fractional investment has been more mainstream in the west, but is gaining popularity in India. It allows investors to buy commercial real estate, even if on a fractional basis. This may not be possible as an individual. Commercial real estate investing also allows for portfolio diversification.
With increasing urbanization and industrialization, more and more real estate companies are entering the commercial real estate business. As a result, an increasing number of investors are investing in commercial real estate in India through fractional ownership. What’s more, you don’t have to go into the market to find and invest into a property. There are commercial real estate platforms that allow online crowdfunding. Let’s look at the top commercial real estate investment companies in India for NRI investors.
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Commercial real estate market analysis 2022: Commercial real estate has been a productive investment option even during the nation-wide lockdown. In 2021 residential as well as commercial real estate saw a very positive response. Stability and security of commercial real estate makes it one of the most resilient investment options. The year 2022 will see a rising demand for commercial office spaces, freehold commercial, residential properties, warehousing, etc. that will maximize returns for investors. This article is for NRIs who are looking to invest in Indian commercial estate for higher and stable returns.
With the decline in Covid-19 cases, real estate has started showing signs of revival in India. Residential sales have started rising again, and the commercial real estate market is also picking up momentum in the top cities of the country, driven by the IT/ ITeS sectors. Gross office absorption stood at 4.39 million sq. ft in the 2nd quarter, showing 32% YoY growth in major cities in India as per a recent JLL report. Bulk hiring by IT/ ITeS sectors is the prime driver of the growing demand for office spaces in major cities. Offices have also started to re-open across cities and developers are bullish on the growth prospects of the commercial real estate market. This is the reason why NRIs are eyeing commercial real estate in India.
Whether it is FDs, mutual funds, insurance or real estate, NRIs have been aggressively investing in India for the last few years. However, many people still ask ‘can an NRI buy or own property in India? As per the Foreign Exchange Management Act (FEMA), NRIs are allowed to purchase certain types of properties in India.