Property Transactions for NRIs in India
Purchase of Property
NRIs can purchase residential or commercial property in India with the permission of the RBI. However, they cannot purchase agricultural land, plantation property, or farmhouses without specific permission from the RBI, which is granted on a case-by-case basis.
Considerations for Property Purchase:
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Costs: Factor in costs such as registration, brokerage, and maintenance, which can total around 10% of the property’s value.
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Exchange Rate Differences: Consider the impact of exchange rate fluctuations.
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Absolute Gain: Ensure the absolute gain covers all costs for a profitable investment.
Sale of Property
NRIs can sell residential or commercial property in India, complying with all relevant rules. This sale can be to a resident of India, another NRI, or a Person of Indian Origin (PIO). Inherited agricultural land or farmhouses can only be sold to an Indian resident.
Tax Implications:
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Capital Gains Tax: NRIs must pay tax on Short-term or Long-term Capital Gains as applicable.
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Tax Exemption: This tax can be avoided by reinvesting the capital gains as per Indian tax laws, such as repurchasing property or investing in specified government bonds.
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TDS Deduction: A Tax Deducted at Source (TDS) deduction obligation under Section 195 of the Income Tax Act applies when purchasing property from an NRI. This TDS can be reduced by obtaining a certificate from the tax department.
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Fund Transfer: Net sale proceeds are credited to the NRO account, and remittance can be made as per regulations.
Power of Attorney
If the NRI cannot attend to the procedures personally, they can issue a special power of attorney to a trustworthy person in India to handle the transactions on their behalf.