NRIs buying property in India is fast becoming a trend now. In India, property prices have been appreciating for the past few years. NRIs buying property in India is at an advantage because of the depreciation of the rupee against the dollar. Whether you are buying agricultural land, or commercial space or even a residential space, the time has never been so good to purchase properties for NRIs in India. You should know that buying property in India does not require you to be physically present due to the Power of Attorney provision. So, if you are considering buying property in India, then it would be a good decision. However, you should be careful. The courts in India take a long time to settle any disputes and investing wisely is very important. We have collected several tips for NRIs buying property in India. Whether you want to are buying agricultural land or a commercial space, or the tax implications for NRI we have all the relevant tips and information just for you.
Nature of Property
The first thing is for you to determine the nature of the property you wish to buy. You should know that as of now, buying agricultural land or plantations is not allowed for NRIs. In certain cases, you may be allowed to buy agricultural land in India after obtaining approval from the Reserve Bank of India. Apart from agricultural space, you might also consider purchasing a commercial space or a residential space. For these kinds of property, you will not be required to get any special permission from the authorities.
Once you are sure of the kind of property you wish to purchase, the next step is to do a thorough background check on the builders. Find out whether they have a legitimate reputation. You must examine all the legal documents before buying the land. For example, there have been several cases where builders have illegally built on agricultural land without permission from the government. In such a case, the building will be considered illegal and this could lead to legal complications for you. Ensure that the building has all the clearances and permits that are required by law. Ensure that you have seen the title deed in the original and that it is solely in the name of the seller before investing. You should probably consult a lawyer at this stage if you are unsure about the procedures in India.
Tax Implications for NRI
When an NRI chooses to sell the property, later on, the TDS (tax deducted at the source) is levied at the rate of 20% for short term capital gains and 30% for long term capital gains. In the case that a lower tax slab is applicable to you, an NRI is eligible to apply for a refund while filing their tax returns. You should know that the slabs that apply to resident Indians will apply to NRIs as well.
The Reserve Bank of India has given permission to banks to allow NRIs to take home loans to purchase a property in India. However, you should know that this amount would not be credited to your account, but directly to the seller’s account. The funds will only be sanctioned in rupees, and you must repay the loan in the same currency. You can use the funds in your NRO/NRE/FCNR accounts to repay the loan as well.
Power of Attorney
In case you cannot be physically present in India at the time of the sale, you can always draw up a Power of Attorney document. This document should only be made in the name of a person you trust. Most NRIs prefer to draw it in the name of their close family members in India. This will allow the designated person to act on your behalf in India.
Repatriation of Funds
In certain cases, gains from the sale of immovable property can be repatriated up to a maximum of $1 million a year. If the amount exceeds this, you will have to obtain permission from the Reserve Bank of India. You should know that the amount repatriated cannot exceed the amount originally paid for acquiring the property if you have used foreign exchange through normal channels to pay for the property.
We hope this has cleared up a lot of things for NRIs buying property in India. Whether it is drafting a Power of Attorney or understanding the tax implications for NRI, you are now in good stead to start investing in India. NRIs buying property in India has never been so easy. Happy buying!