Property Guide – NRI
To understand better and help you own your dream home here are few guidelines that comes in handy to understand how to own your dream home with us.
An Indian Citizen who stays abroad for employment/ carrying on business or vacation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad is a non-resident. (Persons posted in U.N. organizations and officials deputed abroad by Central/ State Government and Public Sector Undertakings on temporary assignments are also treated as non-resident) Non-resident foreign citizens of Indian Origin are treated on par with non-resident Indian citizens.
For Investment in immovable properties a foreign person is deemed to be of Indian Origin if:
(Other than a citizen of Pakistan, Bangladesh, Afghanistan, Bhutan, Sri Lanka or Nepal)
- He held an Indian passport at any time, OR
- He or his father or paternal grand-father was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).
To own a home in India is a dream and it’s a must. To achieve this dream one must abide by the rules laid by the RBI and satisfy certain criteria as the transactions come under the purview of FEMA- Foreign Exchange Management Act.
Can an NRI buy property in India?
Yes, a non-resident Indian can buy either a residential property or a commercial property in India. Further, (there is no limit) on the number of residential or commercial properties that an NRI can purchase in India.
Exception: An NRI however cannot buy agricultural land, plantation land or a farm house in India. He cannot even acquire such property as a gift.
There is however, no bar on inheriting such property.
Do you need RBI permission?
No. RBI permission is not required to buy residential or commercial property.
How to fund the purchase?
Payment for the purchase of property can be made either by way of funds remitted to India from abroad through regular banking channels or through the balance in the NRE, NRO or FCNR Account.
What are the Financing Options?
As on today there are several financing options for NRIs looking to buy a house in India. The RBI has stipulated the following norms for NRIs to buy a house in India.
The home loan amount for a NRI is restricted to a maximum of 80% of the cost and the balance has to borne directly by the NRI.
The remittance of the down payment by the NRI can be made directly from the nation of current residence through normal banking channels such as the NRE/NRO account in India.
The repayment of the principal as well as the interest amount to the financing agency must be done through similar channels only.
What income taxes are applicable on house properties in India?
According to the Indian Income Tax Act, if a person (resident or NRI) owns more than one house property, only one of them will be deemed as self-occupied. There will be no income tax on a self-occupied property. The other one, whether you rent it out or not, will be deemed to be given on rent. If you have not given the second property on rent, you will have to calculate deemed rental income on the second property (based on certain valuations prescribed by the income tax rules) and pay the tax thereof.
Now, the Income Tax Act does not specify if either or both these properties must be situated only in India. Vikas Vasal, Executive Director of KPMG India explains, “At the time of drafting the Income Tax Act, one did not envisage a situation where an Indian would own properties overseas. But now, more and more Indians are settling abroad. So from the reading of the Act, the rule of ‘more than one property’ will apply to global properties.”
What this means is that if you are an NRI and own only one property globally and that property is in India, you would not have to pay any income tax on it in India.
However, let us say you are an NRI resident in USA. You own and live in a house in USA. You also own a house property in India. Even if you do not give the property in India on rent, you would have to pay income tax on deemed rent in India. The deemed rent is determined by certain valuation rules prescribed in the Income Tax Act.
Caveat Emptor: These are few important things that one must bear in mind while investing in India.
Property Title: The seller must have clear title of the property and the required authority to sell it especially in case of inherited house or a joint property.
NDC: There should be no outstanding civic authority dues or electricity/ water bills pending at the time of sale. A No Due Certificate to this effect must be produced by the seller.
Bank Release Letter: In case the property had been mortgaged for a loan or provided as a direct/indirect collateral security for any loan, then the seller must be able to provide a release letter from the concerned bank stating that all outstanding loans have been settled and the documents have been releases.
Permits: The stated house must have all the required approvals and permits from concerned civic authorities with regard to construction and layout.
Litigation: The house under consideration must be verified for any kind of pending litigation.