Investing in real estate in India has always attracted Non-Resident Indians (NRIs) due to the potential for substantial returns and a connection to their homeland. However, navigating property transactions’ legal and financial aspects can be challenging, primarily when residing abroad. This blog post aims to provide a comprehensive guide for NRIs on buying, selling, and understanding the tax implications of property transactions in India. We have compiled a list of 15 frequently asked questions covering various aspects of property ownership, resale, and taxation for NRIs. Additionally, if you are an NRI looking to invest in Tamilnadu, consider connecting with VNCT Global for professional guidance and support.
| No. | Frequently Asked Questions | Answers |
| 1. | What are the eligibility criteria for NRIs to purchase property in India? | NRIs holding an Indian passport or individuals of Indian origin with a valid foreign passport can purchase residential and commercial properties in India without any restrictions. |
| 2. | Can NRIs buy agricultural land or plantation property in India? | NRIs cannot buy agricultural land, plantation property, or farmhouses in India. However, they can inherit such properties. |
| 3. | What types of properties can NRIs invest in while living abroad? | NRIs can invest in residential and commercial properties, including apartments, villas, office spaces, and retail shops. |
| 4. | How can NRIs finance their property purchase in India? | NRIs can finance their property purchase through home loans from Indian banks, loans against fixed deposits, or funds from their Non-Resident External (NRE) or Non-Resident Ordinary (NRO) accounts. |
| 5. | Are there any tax implications for NRIs buying property in India? | NRIs are liable to pay stamp duty, registration charges, and Goods and Services Tax (GST) during property purchase. They are also subject to income tax on rental income and capital gains tax on property sales. |
| 6. | What is the process for NRIs to register a property in India? | NRIs must register the property at the sub-registrar’s office in the jurisdiction where the property is located. They must present identification and property-related papers and pay registration fees. |
| 7. | Can NRIs repatriate the funds from the sale of property in India? | NRIs can repatriate funds from selling up to two residential properties, subject to certain conditions and within the prescribed limit of $1 million per financial year. |
| 8. | What are the legal considerations and documentation required for NRIs purchasing property in India? | NRIs must ensure a clear title, obtain necessary approvals, and verify documents such as a sale agreement, a title deed, an encumbrance certificate, and layout approvals. |
| 9. | How can NRIs manage and maintain their property in India while living abroad? | NRIs can appoint property management companies or trusted relatives/friends to oversee the maintenance, rent collection, and other property-related matters. |
| 10. | Can NRIs rent out their property in India, and what are the associated tax implications? | Yes, NRIs can rent out their property, but they must pay income tax on the rental income in India and may also be subject to tax in their country of residence. |
| 11. | What is the process for NRIs to sell their property in India? | NRIs must find a buyer, negotiate the price, execute a sale agreement, obtain necessary clearances, and complete the registration process at the sub-registrar’s office, while ensuring proper payment of applicable taxes and repatriation of funds. |
| 12. | Are there any restrictions on the resale of properties by NRIs? | There are no specific restrictions on resale, but NRIs cannot sell agricultural land, plantation property, or farmhouses to another NRI or a foreign national. Such properties can only be sold to Indian residents. |
| 13. | How is capital gains tax calculated for NRIs selling property in India? | Capital gains tax is calculated by subtracting the indexed acquisition cost and improvement from the sale price. Short-term capital gains (holding period of up to 2 years) are taxed at the individual’s applicable slab rate, while long-term capital gains (holding period over 2 years) are taxed at 20% with indexation benefits. |
| 14. | Can NRIs claim tax exemptions on the sale of property in India? | Yes, NRIs can claim exemptions under Section 54 and Section 54F of the Income Tax Act. Section 54 allows exemptions on long-term capital gains from the sale of a residential property if the gains are invested in purchasing or constructing another residential property in India. Section 54F allows exemptions on long-term capital gains from the sale of non-residential properties if the entire net sale consideration is invested in purchasing or constructing a residential property in India. Both exemptions require the new property to be purchased within one year before or two years after the sale, or constructed within three years of the sale. |
| 15. | What is the TDS (Tax Deducted at Source) applicable for NRIs selling property in India? | The buyer must deduct TDS at the rate of 20% (plus applicable cess and surcharge) for long-term capital gains, and at the applicable slab rate for short-term capital gains, before making the payment to the NRI seller. The NRI can claim a refund if the actual tax liability is lower than the TDS deducted, by filing an income tax return in India. |
Investing in real estate in India can be a rewarding venture for NRIs, provided they clearly understand the regulations and processes involved. By staying informed about the eligibility criteria, financing options, property management, resale guidelines, and taxation norms, NRIs can make well-informed decisions and successfully navigate the Indian property market. We hope this guide has provided valuable insights and answers to NRIs’ most common questions while buying or selling properties in India. Always consult legal and financial experts before making significant investment decisions to ensure a smooth and hassle-free experience. Contact VNCT Global to benefit from their expertise and local knowledge for those interested in investing in Tamilnadu.
