If you are a non-resident Indian (NRI) planning to buy a 2 BHK flat in Nagpur, time could not have been better for you to do so. While India's real estate sector has seen price correction in the recent past, buying a property in Indian has also become more lucrative with favourable currency rates.
We look at what differentiates NRI property buying from resident property purchases in India:
An NRI buying immovable property in India does not require any special permission. However, the payment can't be made in foreign currency. NRIs can make the purchase using Indian currency, the Rupee, through funds received in the country by means of normal banking channels. These funds have to be maintained in a non-resident account under the foreign exchange management act (FEMA) and the Reserve Bank of India (RBI) regulations. There are also no restrictions on the number of immovable properties that an NRI may purchase, either residential or commercial.
NRI investments into the property market are treated on par with the investment made by resident Indians, but for some exceptions:
Nature of property
NRIs can buy all sorts of immovable properties in India other than agricultural land, farmhouse and plantation property. To acquire agricultural land/plantation property/farm house in India, they have to get approval from the RBI and the government.
Taxation
When an NRI sells a property in India, TDS (tax deducted at source) calculation is done at the rate of 20.6 per cent on long-term capital gains and 30.9 per cent on short-term capital gains. However, the final taxation rate is similar for NRIs and resident Indians. If an NRI has a lower tax slab applicable to him, he can apply for a refund of the TDS by filing their income tax return.
Home loan
The RBI has given general permission to banks and housing finance companies registered with the National Housing Bank to provide loans to NRIs for buying residential property in India. Sanctioned in Indian currency, the loan has to be repaid using the same currency. However, the loan amount, according to the regulations, cannot be credited directly to the bank account of an NRI and has to be disbursed to either the seller's or the developer's account. The loan can be repaid using funds in an NRI's NRO/NRE account or FCNR deposits.
Power of attorney (PoA)
As they live outside, NRIs have an option to give PoA to their friends or relatives to complete the property purchase process in India. The PoA can be general or specific about the rights your representative can exercise.
Repatriation of funds back to the foreign country
There are certain guidelines for the repatriation of funds. An NRI or Person of Indian origin (PIO) may repatriate the proceeds from the sale of immovable property in India on the conditions mentioned below:
The property must have been purchased in accordance with the FEMA directives, applicable at the time of purchase.
The amount repatriated cannot exceed the original amount paid for the property, if the property was acquired in foreign exchange remitted through normal banking channels or out of funds held in an FCNR (B) account.
However, in the following circumstances, the NRI/PIO may repatriate a maximum of $ 1 million per financial year:
- Out of the balance held in the NRO account, if the property was purchased out of rupee source of funds.
- If the property was acquired by way of gift, sale proceeds must be credited to an NRO account and may be repatriated thereafter.
- If the property was inherited from a resident Indian, funds may be repatriated on producing documentary evidence proving inheritance, an undertaking by the NRI/PIO, and a certificate of an authorised chartered accountant in the formats prescribed by the Central Board of Direct Taxes (CBDT).
- In the case of a residential property, repatriation of sale proceeds is restricted to less than or equal to two properties.
- A foreign national may repatriate sale proceeds even if the property was inherited from a person outside India. However, prior approval of the RBI must be obtained.
- A citizen of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan and Iran must seek specific approval from the RBI for repatriation of sale proceeds.
Apart from the above-mentioned points, an NRI is given the same treatment as applicable to any other Indian resident, while looking for 3 bhk flats for sale in Nagpur or anywhere in India.
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