Buying real estate generally involves months of preparation. You may also be able to obtain property as a result of an inheritance. If you are an average citizen of India, transferring ownership of inherited property is not difficult. When it comes to Indians living overseas, however, the laws are different.
To begin, any property transfer to non-resident Indians (NRIs) or individuals of Indian ancestry must adhere to the Foreign Exchange Management Act (FEMA). The person bequeathing the property should have purchased it by FEMA laws or any other applicable foreign exchange law at the time of acquisition. If the inheritance is in the name of a foreign citizen, the transfer must be approved by the RBI.
Under the Foreign Exchange Management Act, the Reserve Bank of India (RBI) supervises the purchase and acquisition of immovable property in India by non-residents (FEMA). An NRI (Non-Resident Indian) is an Indian citizen who lives outside of India under FEMA, whereas an OCI is a non-Indian citizen who was born in India or whose parents or grandparents were born in India (Overseas Citizen of India).
Also Read: High Return Real Estate Properties For NRI Investments In India
Property types and payment options
NRIs are permitted to buy as many residential or commercial properties as they want in India, according to RBI guidelines. Even once the transaction is completed, they are not obligated to notify the RBI about such acquisitions. The NRI can buy the approved properties from both residents and other NRIs. Only one immovable property may be held jointly by an NRI and his or her non-NRI spouse. Without RBI clearance, NRIs cannot buy any agricultural land, farmhouse, or plantation property in India.
Such purchases might be paid for by NRI remitting money from outside India through a proper banking channel. Alternatively, he can spend funds in his NRE/NRO or FCNR accounts. Payment for such permissible purchases in India, however, cannot be made with traveler’s checks or foreign currencies. NRIs can also get a house loan in Indian rupees from their Indian employer, a housing finance firm, or a bank in India to help fund their purchases.
Direct remittance from overseas or the NRI’s NRE/NRO/FCNR account can be used to service the house loan. An NRI might also utilize the rental income from the property to pay off the mortgage. In addition to the aforementioned sources, the NRI’s house loan might be serviced by money transferred to his account in India by a relative.
Also Read: What Is The Minimum Amount For NRI Real Estate Investments In India?
Other options for purchasing immovable property
An NRI may also inherit any property, including agricultural land, through a Will or under the personal law applicable to the NRI. It is permissible to inherit from an NRI if the NRI owner purchased the property following the approved rules. He can also accept gifts of residential and commercial property in India from any of his NRI, OCI, or resident Indian relatives.
An NRI is entitled to keep all immovable possessions he acquired while living in India, such as agricultural land, a farm home, and so on.
Transfer of real estate and remittances from outside India
Any immovable property owned by an NRI in India can be sold or gifted to any resident, but only commercial or residential property can be sold or gifted to another NRI. Direct payment for the acquisition of property in India from a person residing outside of India to another person residing outside of India is not authorized.
An NRI is allowed to remit the whole sum on the sale of a property in India to the degree that the money was transferred from outside India or used from an NRE or FCNR account to buy the property. An NRI is only allowed to remit the whole amount for two residential properties. In addition, an NRI is permitted to remit up to $10 lakh per year on the sale of any of his assets in India.
Also Read: The Scope Of NRI Real Estate Investments In India In 2022
In India, there is a tax on property sales
The taxation rules on profits on the sale of immovable properties are the same as for a resident taxpayer, with the exception that in the case of an NRI seller, the buyer is required to deduct tax at source at the full rate applicable to the profits without any threshold limit, whereas in the case of a resident seller, the tax is deducted at only 1% and only when the sale consideration of the property exceeds Rs. 50 lakh. If the property is sold after two years, NRIs must pay a flat 20% tax on the indexed capital gains; otherwise, tax at the corresponding rate must be paid. By investing indexed LTCG in another residential property in India, an NRI can avoid paying long-term capital gains on a residential property in India. He must invest the selling consideration in a residential property in India to qualify for LTCG on commercial property. Alternatively, if an NRI invests in capital gains bonds within six months, he or she can claim LTCG exemption up to $50 lakh.
Also Read: Golden Rules For NRI Investments In India During Market Dip
Assetmonk is a high-end Wealthtech platform that connects investors with high-yielding real estate opportunities. This website acts as a conduit for NRI real estate purchases. It simplifies real estate investing procedures by providing high-quality real estate asset opportunities at reasonable prices around the country. It saves NRIs time from the inefficient and time-consuming procedure of searching for a property in India.
