Buying or Selling Property with NRIs

Introduction

Non-residents' purchases and acquisitions of immovable property in India are regulated by the Foreign Exchange Management Act (FEMA), which is overseen by the Reserve Bank of India (RBI).

For FEMA purposes, a Non-Resident Indian (NRI) is an Indian citizen who resides outside India. An Overseas Citizen of India (OCI) is a foreign citizen of Indian origin who is granted similar benefits as NRIs for real estate investment.

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Types of Property NRIs Can Buy and Payment Methods

The RBI provides guidelines allowing NRIs to purchase specific immovable properties in India without needing special permission. NRIs can buy residential and commercial properties but are not allowed to purchase agricultural land, farmhouses, or plantation properties.

Payment Methods

• Banking Channels: NRIs must pay through a banking channel via remittance from overseas or use their NRE/NRO or FCNR accounts.

• Home Loans: NRIs can finance property purchases through home loans from Indian banks, housing finance companies, or their Indian employers. EMIs for these loans can be paid from overseas accounts or the NRI’s NRE/NRO/FCNR accounts. Rentals from the property or money from relatives' accounts can also service the loan.
   

Property Transactions for NRIs

Purchasing Property

In addition to buying property, NRIs can receive residential or commercial property as a gift from NRIs, OCIs, or resident family members. Although NRIs cannot buy agricultural land or farmhouses, they can inherit such property from Indian citizens.

Selling Property

NRIs can sell property in India to Indian residents or other NRIs. However, agricultural land, plantations, and farmhouses can only be sold to Indian citizens. Post-sale, repatriating the sale proceeds depends on the original purchase method and amount.

Documentation Required

To sell property in India, NRIs generally need:

1. Property title documents and a power of attorney, if applicable.

2. No objection certificate indicating no outstanding liabilities.

3. Identification proof, residence proof, and PAN card.

4. Details of the NRO bank account for depositing transaction proceeds.

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Tax Implications

When NRIs buy property in India, they must deduct Tax Deducted at Source (TDS). If buying from a resident seller, TDS at 1% is applicable for properties exceeding Rs 50 lakh. Long-term capital gains tax is 20%, and short-term gains are taxed according to income tax slabs.

When selling property, the buyer must deduct TDS at 20% for long-term capital gains or 30% for short-term gains. NRIs can claim exemptions under Sections 54 and 54EC on long-term capital gains from residential property sales.

Buying or selling property in India as an NRI involves navigating complex legal and financial regulations. It is essential to understand these rules thoroughly to ensure compliance and avoid complications. Consulting with an expert lawyer for NRI  is advisable to facilitate smooth transactions. LawRato's Legal Advice service also offers free Legal Help for NRI from top lawyers.

Advocate Chikirsha Mohanty

Greater Kailash - 1, Delhi
5 years

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