Buying property in India as a Non-Resident Indian (NRI) can be a valuable investment, offering a way to stay connected to your roots and build long-term assets. However, there are certain guidelines and requirements that NRIs must follow. This guide outlines the key legal and tax considerations to help make the process smoother.

Understanding Eligibility

The good news is that under the Foreign Exchange Management Act (FEMA), NRIs can buy property in India, including residential and commercial properties. However, NRIs cannot purchase agricultural land, farmhouses, and plantation properties unless they inherit them.

Choose the Right Type of Property

NRIs can freely buy residential and commercial properties, but there are restrictions on agricultural land and plantations unless they inherit it. This choice can affect your property management and rental options, especially if you lease the property overseas.

Ensure All Legal and Financial Documents Are in Place

Before investing, NRIs should make sure they have the following:

• PAN Card: Required for transactions and tax purposes in India.
• Proof of Identity and Address: Passport, OCI or PIO card, and current address proof.
• Bank Account in India: An NRE (Non-Resident External) or NRO (Non-Resident Ordinary) account is needed for easy financial transactions.
• Power of Attorney (POA): If you cannot be present in person to sign documents, a POA-authorized individual can sign on your behalf.

Understand Financing Options for NRIs

NRIs may access home loans from Indian banks, provided they meet the eligibility requirements. Here’s what to keep in mind:

• Indian banks offer home loans to NRIs at competitive interest rates.
• A down payment is usually required, and banks may provide financing for a portion of the property’s value, such as luxury apartments in Banashankari.
• Loan repayment must be made from an NRE or NRO account in Indian Rupees.

Research Legal Compliance and Property Verification

It’s important to verify the property to avoid any potential legal issues. NRIs should check:

• Title of Property: Check the property title deeds to confirm clear ownership.
• Encumbrance Certificate: Verifies that the property is free of legal dues.
• RERA Registration: The Real Estate Regulatory Authority works to promote transparency and compliance with regulations in real estate projects.
• Tax Dues: Make sure that property taxes are paid and that no dues are pending.

Tax Implications and Financial Planning

Property purchases in India come with tax implications for NRIs, such as:

• TDS (Tax Deducted at Source): TDS on property purchases varies based on the property value, with different rates applying to properties above and below a certain threshold.
• Capital Gains Tax: Property sales are subject to short-term or long-term capital gains tax.
• Rental Income Tax: Income earned from renting the property in India is taxable under Indian laws.

Also Read: India’s Real Estate Landscape: Overcoming Challenges and Seizing Opportunities

Plan for Property Management

Many NRIs prefer hiring property management companies to handle maintenance and tenant management. A property management service can handle renting, regular maintenance, payment collection, and inspections, making it easier for NRIs to manage their assets while living abroad.

Understand Currency Repatriation Rules

NRIs may want to repatriate the proceeds from property sales or rental income. Under FEMA guidelines, an NRI may be able to repatriate a certain amount per financial year, provided tax compliance is completed. The repatriation of capital gains must follow RBI guidelines and can be processed through NRE or NRO accounts.

Final Thoughts

Buying property in India as an NRI may be a rewarding venture with long-term financial and sentimental value. Ensuring compliance with legal guidelines and planning finances carefully can help NRIs make the most of their investment. Consulting real estate advisors, tax experts, and legal consultants can further smooth the process, helping make your property investment more secure and manageable.

By following these steps, NRIs can better navigate property purchases in India and help make the process more straightforward. Whether you’re looking to secure an asset, generate rental income, or build a future home, understanding the regulations and planning can help you make a wise investment.

Disclaimer: This content is for general informational purposes only and should not be considered as financial advice. The content is not intended to be a substitute for professional financial advice, investment advice, or any other type of advice. You should seek the advice of a qualified financial advisor or other professional before making any financial decisions.

Published by Stephanie M.