FAQ

Basics of Investment in Immovable Property

Cannon-residents invest in immovable property in India?

Yes, non-residents (NRIs/PIOs) are allowed to invest in residential or commercial property in India, subject to compliance with the Foreign Exchange Management Act (FEMA) guidelines.

Are here any restrictions on the type of property non-residents can buy?

Non-residents can purchase residential or commercial property, but they cannot purchase agricultural land, plantation property, or farmhouse in India unless they inherit it.

What are the eligibility criteria for non-residents to purchase property in India?

The buyer must be an NRI/PIO.
The property should be for personal use (residential or commercial) and not for agricultural or plantation purposes.

Bank Accounts for Property Transactions

FAQ

Which bank accounts can be used by NRIs for property-related payments?

Non-residents can use the following accounts to make payments for property investments:
NRE (Non-Resident External) Account: For funding from outside India (foreign income).
NRO (Non-Resident Ordinary) Account: For funding from income generated in India, like rental income, sale proceeds, etc.
FCNR (Foreign Currency Non-Resident) Account: For funding property investment using foreign currency fixed deposits.

Can I use my resident bank account in India for property transactions as anon-resident?

No, non-residents cannot use resident accounts for property transactions. Payments must be made from an NRE, NRO, or FCNR account to comply with FEMA regulations.

Taxation on Investment in Immovable Property

FAQ

What taxes are applicable on rental income from property owned by NRIs?

Rental income from property in India is taxable in India under the head “Income from House Property.”
Tax is deducted at source (TDS) at a rate of 30% on the gross rental income.
NRIs can claim deductions on municipal taxes, interest on loans, and other expenses under Section 24 of the Income Tax Act.

Are there any taxes on the sale of immovable property by non-residents?

Yes, there are taxes on the sale of property in India:
      Capital Gains Tax: Taxed under long-term or short-term capital gains, depending on the holding period.
           Short-term capital gains: If the property is sold within 2 years of purchase, taxed at 30%.
              Long-term capital gains: If the property is held for more than 2 years, taxed at 20% with indexation benefits.
‍TDS on Sale Proceeds: The buyer is required to deduct TDS at the rate of 20% (plus applicable cess) on the sale proceeds while making the payment to the seller.

Are there any exemptions available on capital gains for NRIs selling property in India?

Yes, NRIs can avail of exemptions on capital gains under certain conditions:

‍Section 54: Exemption on long-term capital gains if the proceeds are reinvested in purchasing a new residential property.

‍Section 54EC: Exemption if the capital gains are invested inspecified bonds (e.g., REC or NHAI bonds) within 6 months of the sale.

Deductions Under the Income Tax Act on Capital Gains

FAQ

Can NRIs claim deductions on capital gains tax for the sale of immovable property?

Yes, NRIs can claim deductions on capital gains tax for the sale of immovable property in the following scenarios:
‍Section 54:
Exemption on long-term capital gains if the proceeds are reinvested in the purchase of a new residential property. This is applicable if the sale is of a residential property, and the reinvestment must happen within 1 year before or 2 years after the sale.
‍Section 54F:
Exemption for long-term capital gains if the proceeds are used for purchasing a new residential property. This exemption is available even if the property being sold is not a residential property, but the proceeds are used to buy a residential property. The entire sale proceeds (net of cost of acquisition) must be reinvested in the new residential property for claiming the full exemption.
‍Section 54EC:
Exemption if the long-term capital gains are reinvested in specified bonds like those of REC (Rural Electrification Corporation) or NHAI (National Highways Authority of India) within 6 months of the sale. The maximum exemption is ₹50 lakh per financial year.

How does indexation work for NRIs when calculating long-term capital gains tax on the sale of immovable property?

Indexation adjusts the cost of acquisition of the property for inflation, using the Cost Inflation Index (CII) published by the Indian government.
This helps reduce the capital gains tax by increasing the cost base of the property, thus lowering the taxable gain.
This benefit is available under Section 48 for long-term capital gains on the sale of immovable property.

Reporting Requirements

FAQ

Are there any reporting requirements for NRIs when purchasing property in India?

Yes, when purchasing property in India, NRIs must report the following:
FEMA Reporting: The purchase should be reported to the Reserve Bank of India (RBI) under FEMA regulations.
Income Tax Reporting: NRIs must file an income tax return if there is any rental income or capital gains from the sale of property.

Is it mandatory to file an income tax return for NRIs who have invested in property?

Yes, NRIs must file an income tax return in India if they earn any rental income, have capital gains, or if TDS has been deducted on their income.

Repatriation of Funds Post-Taxation

FAQ

Can NRIs repatriate the sale proceeds of immovable property?

   Yes, NRIs can repatriate the sale proceeds of property after paying applicable taxes. The process is subject to the following:
     Repatriation is allowed up to USD 1 million per financial year (after fulfilling tax and documentation requirements).
     The amount must be credited to the NRO account before repatriation. The bank will issue a certificate of repatriation.

What documents are required for repatriation of property sale proceeds?

The following documents are required for repatriating sale proceeds:
    Proof of tax payment (Form 26AS and Tax Clearance Certificate).
    Sale deed and property-related documents. Form 15CA and Form 15CB, certifying tax compliance.
    The original sale deed and details of the NRO account from which the repatriation is being made.

How long does the repatriation process take after the sale of property?

There patriation process typically takes 2-3 weeks once all documentation is in order. Delays can occur due to incomplete paperwork or additional tax filing requirements.

Additional Considerations

FAQ

Can NRIs use the sale proceeds of immovable property for investment abroad?

Yes, after taxation, the repatriated funds can be used for investments abroad, including investments in foreign stocks, property, or other assets.

Are there any restrictions on repatriation of funds to countries with restrictions or sanctions?

Yes, repatriation of funds may not be allowed to countries that are under sanctions by the Indian government or those that do not comply with international banking regulations.

FAQ – Investments in Immovable Property by Non-Residents in India

Basics of Investment in Immovable Property

FAQ

Bank Accounts for Property Transactions

FAQ

Taxation on Investment in Immovable Property

FAQ

Deductions Under the Income Tax Act on Capital Gains

FAQ

Reporting Requirements

FAQ

Repatriation of Funds Post-Taxation

FAQ

Additional Considerations

FAQ

Services

More on RMC

More on RMC

For Enquiry

Feel free to call on

Location