Buying or Selling a Property From and To an NRI

Introduction

Non-residents’ purchases and acquisitions of immovable Property in India are controlled by the Foreign Exchange Management Act (FEMA), which is handled by the Reserve Bank of India (RBI).

For FEMA purposes, a Non-Resident Indian (NRI) is an Indian citizen who resides outside of India.

A non-Indian citizen who was born in India or whose parents or grandparents were born in India is considered OCI (Overseas Citizen of India). Because NRIs and OCIs are regarded equally for the sake of real estate investment.

Types of Property and payment methods available to NRIs for Buying

The Reserve Bank of India provides directives regularly outlining the legislation and granting broad authority to NRIs to acquire certain immovable assets in India without having to seek approval from the RBI. The RBI has granted universal authorization to NRIs to purchase certain immovable properties in India under these instructions.

NRIs are permitted to acquire residential or commercial properties in India under these criteria. However, they are not permitted to purchase agricultural land, farmhouses, or plantation property in India. Because it is trendy to own a farmhouse, it is critical to note that under current laws, NRIs cannot own a farmhouse in India.

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Modes of payment for Property purchases in India

To purchase permissible Property in India, NRIs must either pay through a banking channel via remittance from overseas or use the balance in their NRE/NRO or FCNR accounts. Because funds for this purpose must be obtained through only authorized sources, including banking channels, payment cannot be made in the form of traveler’s checks or foreign cash in India.

NRIs are also permitted to finance the acquisition of a residential property with an Indian rupee home loan. The house loan might be issued by the NRI employee’s Indian employer, a housing finance firm, or a bank to finance the Property.

Home Loans and EMI servicing on Property

Payments of EMI for repaying a house loan acquired in Indian currency in India can be made by either direct transfer from overseas or from money lying to the credit in the NRI’s NRE/NRO/FCNR account. In addition to the foregoing sources, the house loan can be serviced using the rentals obtained from the Property or money sent to the borrower’s account from the accounts of the borrower’s relatives.

Purchases of immovable Property are permitted

In addition to purchasing Property, an NRI may receive any residential or commercial property as a gift from any of his NRI, OCI, or resident family. Though an NRI is not permitted to purchase agricultural land or other Property in India, he is permitted to inherit such Property from any Indian citizen. In the absence of a legal Will, an inheritance may be received from a non-relative or from a relative under personal law.

Furthermore, an NRI may inherit any immovable property in India from another NRI if the NRI acquired the Property under the permissible conditions in effect at the time of acquisition.

Can a non-resident Indian sell property in India?

The Reserve Bank of India (RBI) allows a non-resident Indian (NRI) to sell a property in India. There are certain limits on who they may sell houses and land:

1. Most homes can be sold to an Indian resident or another NRI.

2. Agricultural Property, plantations, and farmhouses can only be purchased by Indian citizens.

You may be able to repatriate the cash once you’ve sold the Property, but the restrictions may differ depending on the amount of the payment and how you purchased the Property in the first place. We’ll go through this in further depth later.

Can a non-resident Indian sell agricultural land in India?

Ordinarily, NRIs are not permitted to purchase or hold agricultural Property, plantations, or farmhouses. However, as an NRI, you may be able to hold certain sorts of real estate if you were an Indian resident at the time of purchase or if you inherited it from a family member.

Documents required for an NRI to sell Property in India

The specific documents required will depend on the nature and value of the Property, as well as what you want to do with the proceeds.

A lawyer may advise you through the paperwork that is likely to be required in your unique case, which will include the following:

1. Property title documents in the Seller’s name and a power of attorney, if applicable.

2. No objection certificate demonstrating that the Property has no outstanding obligations to pay

3. Your own evidence of identification, residence proof, and PAN card

4. Details of your NRO bank account where the proceeds of the transaction will be deposited

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An NRI can sell the Property in India without obtaining authorization from the RBI. If you are a PIO, you can sell to a resident of India or an NRI without prior authorization, but if you want to sell to another PIO, you must first obtain RBI clearance.

Tax Implications on NRIs Buying and Selling Property

There are some tax issues in order to obtain the Property. It is critical to determine whether a seller is a resident or a non-resident under the Income Tax Act. An NRI who purchases immovable Property in India must deduct TDS, which is calculated depending on the individual’s residence status and the kind of capital gains.

If an NRI purchases an immovable property in India through a resident, he must pay TDS at a rate of 1% if the selling value exceeds Rs 50 lakh. Long-term capital gains are taxed at 20%, whereas short-term gains are taxed at the relevant income tax slab rates for NRIs based on total income taxable in India.

When an NRI sells Property, the buyer is required to deduct TDS at the rate of 20%. If the Property is sold within two years (reduced from the date of acquisition), a TDS of 30% is required. NRIs are permitted to claim exemptions under Sections 54 and 54EC on long-term capital gains on the sale of residential Property in India.

An NRI who purchases immovable Property in India is required to deduct TDS and comply with Income Tax Compliance Standards. The rate of TDS is decided by the Seller’s residence status and the type of capital gains.

Conclusion

Buying or Selling a property by NRI is tough due to the legal and financial components of the deal; purchasing a home from a non-resident Indian (NRI) is considerably more onerous. It is because the regulations in such circumstances change purchasers must exercise extreme caution while doing such transactions.