Buying a house in India – Useful Information for NRI

Often an NRI would want to get a proper insight into the nitty-gritty’s of buying a home in Chennai. In our earlier article on “The Economics of owning a home”, we had discussed briefly about how NRI can go about purchasing a home in India. In this post, we shall elaborately discuss how an NRI can benefits after owning a home in India.

It is a known fact that an individual NRI need not get any approval from RBI or any other government authority to buy a property. He also need not pay any tax whatsoever for acquiring a property in India.

On renting the property, we have earlier discussed that there is no restrictions renting the property purchased. However he has to give his PAN details if he has rented out and wants the rental income to be repatriated to him.

Many NRI prefer to get the rental income collected by his parents.

Also we have seen that the purchased property of the NRI can be sold. The sale proceeds would be subject to capital tax gains in India. If the property was held for less than 3 years, the NRI should pay roughly 30% as tax. If the property on the other hand is held for more than 3 years, the capital tax would work out nearer to 20%.

Now let us see some other smaller things that any NRI would be interested to get informed:

1)            If you decide to rent out the purchased property, appoint a caretaker in the absence of your parents. A good lease and rental agreement should be made before renting it out.

2)            Even if you are a US green card holder, the rules for NRI applies for you too and you can purchase a maximum of 2 properties from your NRE account.

3)            One has to pay the taxes on the rental income at the rates prevailing. You can opt to pay the tax here and claim the rebate to it in the country you are domiciled. All you need to check is if the country you are domiciled is a signatory with India with respect to avoidance of double taxation.

4)            One important doubt many NRI would have is if they retain their properties they bought when they were in any other country. The answer is yes. The government does not place any restrictions on this. Only thing is the NRI has to abide by the rules of the country in which he / she is holding the property.

5)            On selling the property acquired as an NRI, if he has acquired through his NRE account, he can repatriate money for two residential properties. If the property was acquired through an NRO account, he can repatriate only after ten years.

6)            One more point to be noticed while selling the property that was acquired through your NRE account is the amount of money that can be repatriated is the amount that is equivalent to the amount used to buy theproperty through the NRE account.

7)            An NRI can gift properties to his/her relatives here. This is allowed by the authorities here in India.