NRIs have been opportunistic in stipulations of returns and investment avenues. The government frequently comes up with fresh schemes to magnetize more and more money through investments from abroad. The real estate is such a sector which always attract the attention of NRI’s.
The RBI has also permitted all the non-residents who own Indian passports and people of Indian derivation to put their wealth in this sector. The quantity of NRIs investing here is increasing speedily as the worth of the Indian currency is depreciating and this sector offers better returns. Little place in the motherland usually gives an emotional support and a sense of security, & this is another reason of speculation in real estate sector by NRIs.
RBI along with FEMA OR Foreign Exchange’s Management Act has become moderate in terms of regulations and rules for NRI are who are searching for an investment within real estate. They have not only simplified the rules but moreover are providing the benefits of repatriation of all the capital involved. Government is planning various investment growth tricks through their investment council, to generate an environment suitable for NRI’s to invest money.
How can Non-residents spend in real estate?
As per the regulations of RBI and FEMA, an NRI is allowed to make specific investments in real estate. An NRI is permitted to do the subsequent investments in real estate:
1. Any fixed property can be brought by an NRI within India other than farm house, plantation property and agricultural land.
2. Obtain any possessions by inheritance.
3. He could get any immovable possession as mentioned above in gift from person of Indian origin, Indian resident, or Indian citizen living outside India.
4. He could transfer immovable belongings to any Indian resident by sale.
5. Also, he can reassign any agricultural land, plantation land or farm house to any citizen of India through gift.
6. He also can transfer his commercial or residential property through gift to any individual either residing in abroad or India or person of Indian originality.
Tax implication for NRIs looking out for real estate in India:
Every NRI has to disburse stamp duty in addition to registration fees during purchase. He is allowed to avail all types of benefits with Indian residents at par on interest paid for home loan. However, tax process becomes filled with twists and turns in case the real estate is leased.
As amount of income got from such actions come under the income from property, thus, standard deduction is valid as per standard slab. In such cases, the NRI will need to pay the pertinent tax in case he is living in the country wherein global income is taxable until the country has a Double Tax Avoidance Contract with India.
A special benefit for NRIs is the sum, which is paid out for the home loan interest is deductible from the NRI’s taxable income even without an upper limit. NRI is legally accountable for the payments of capital gain tax as approved under Income Tax Act, if he sells the property.
Principal Amount Repatriation (original investment amount / capital invested) :
1. In case property was purchased with funds entirely brought into India via banking channel (i.e. outer fund, either transferred to the seller’s account directly or transferred to NRI’s own NRE account first and paid to seller via issue of cheque from the account) or via funds available in NRE accounts already, the whole principal sum can be repatriated easily without any restriction for a maximum 2 residential properties in addition to unlimited commercial properties in lifetime of NRI.
Restrictions: When it comes to residential property, unlimited repatriation of the principal is allowed for the first 2 purchased properties and sold by NRI in his life. From 3rd property onwards, principal portion needs to be deposited within NRO account from where a maximum USD 1 Million can be repatriated for each financial year for each person.
2. If the property was purchased with funds present in NRO account entirely, the entire sale proceed (both profits and principal) must be deposited first in the NRO account and a maximum sum of 1000,000 USD can be repatriated for each person for each financial year. This USD 1 million limit per person for each financial year applies to repatriations of sale proceed of property acquired via inheritance as well.
3. If the property has been bought with a blend of present funds in the NRO account and new finances remitted from outside of India or from balance existing in NRE accounts, then the individual rules explained above will apply in complete proportion of invested funds. This means, principal invested out from NRO account could be repatriated to an extent of 1 million USD only and principal invested from NRE/FCNR funds or external sources can be repatriated without any limit completely.
