Legally Yours: Tips For NRIs Investing In Indian Real Estate

With the Prime Minister Narendra Modi-led Government at the Centre easing
investment norms for real estate in India, Non-Resident Indians (NRI) have
more reasons to invest here. However, understanding various laws
regulating such purchases is of key concern.

Here are seven legal tips for NRIs looking to invest in property in India.

• If you invest the capital gains on the sales of your property in
  another property in India two years after the transaction, you will receive
  a waiver on Tax Deducted at Source (TDS). Under such circumstances, NRIs
  would not have to pay capital gains tax.

• According to the Foreign Exchange Management Act, an NRI is allowed to sell his property in India only three years after the date of acquisition or after the payment of the final instalment, whichever is later. You can save on capital gains tax, if you sell your property three years after the purchase. In this case, you will have to pay 20 per cent of the total benefit as long-term capital gains tax. If you sell the property within three years, capital gains will be taxed at 30 per cent.

• Funds invested in residential properties in India can be repatriated to the country in which you reside for only up to two purchases. So, when you buy multiple residential properties, from the third property onwards, you will be able to repatriate only up to $1 million if it is deposited in an NRO (Non Resident Ordinary) account. On commercial properties, there is no such bar.

• NRIs, who buy real estate in India, should file for incumbent taxes on the property and on the income that property generates.

•  If you are unable to come to India to proceed with the transaction, choose the person carefully while granting power of attorney for registration, execution of the sale and other functions.

• According to some court rulings, NRIs can claim tax exemptions on a property purchased abroad. However, consult legal experts before taking such a decision.

• Remember that rental income arising from the property you bought is taxable, even if you live abroad.