Real estate is one of the most popular NRI investments in India as it not only gives an attractive return on investment, but also makes them feel that they have tangible assets in their home country. NRIs can buy or own a property in India, but they should be aware of legal provisions in the Foreign Exchange Management Act (FEMA) for purchasing the immovable property in India. There are rules for NRI investment in real estate in India, including TDS on rental income, restrictions on purchase of agricultural land by NRI, home loans, etc.
NRIs who want to invest in commercial real estate in India or ask any question related to real estate can schedule a call with the NRI investment expert right away.
Rules for NRI investment in real estate in India
Following are important rules for NRI investment in real estate in India:
- The Reserve Bank of India has permitted NRIs to buy residential and commercial properties in India. And they don’t need to obtain a certain permit from the RBI.
- As per the income tax law, NRIs can own as many properties in India as they want.
- However, NRIs can’t buy any agricultural land or plantation property/ farmhouse in India. For special reasons to buy the agricultural land, the Reserve Bank of India can review the case.
- NRI buyers/ investors can make the payment for the purchase of a property through normal banking channels by way of inward remittances, using the NRE/ NRO accounts. They can also submit the post-dated cheques or choose ECS from NRE/ NRO accounts.
- Payments made for the purchase of property in India by NRI via traveler’s cheque or in foreign currency notes shall be accepted.
- There is no upper limit on the home loan that NRI can get to buy properties in India.
- NRIs can give the Power of Attorney in India to someone to conduct transactions on their behalf, such as registering property, making payment, etc. The person carrying Power of Attorney can sign documents on behalf of the NRI investor.
- The NRI buyer will also be liable to pay taxes and charges, like registration fee, stamp duty, yearly property taxes, and the GST for the property under construction.
- You will be taxed at 30% through tax deducted at source (TDS) on rental income, and the remaining amount will be repatriated under the FEMA rules.
- TDS on sale of property by NRI is applicable at the rate of 20% on the sale proceeds. Cess and surcharge will also be applicable over and above the TDS.
- Non-Resident Indians can freely rent out their property in India without seeking permission from the RBI. Rental income as a current account transaction can be freely sent abroad.
Rules for inheritance & gift of property
An NRI does not need to seek any permission to acquire any immovable property in India, apart from agricultural land/ plantation property for farmhouse by way of:
- Gift from a normal resident.
- Inheritance of property from a normal resident outside India who had received such a property as per the provisions of the foreign exchange law applicable at the time of acquisition by him/her.
Also Read: NRI selling inherited property in India: Tax Implications 2022
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