Things NRIs Must Consider When Buying Property in India
As an NRI, it might seem that your options are limited for real estate purchase, but that is hardly the case. The Indian Government makes several considerations when offering investment opportunities to NRIs. Out of all the possible investment vehicles available to NRIs, real estate is one of the best ones. However, there are 10 important things that every NRI must scrutinize, before purchasing any property in India.
10 Things to Keep in Mind :
1. A minimum of three years is highly recommended, especially when buying property for the purpose of investment only.
2. If you sell properties within three years of buying them, the IT department considers it as short-term capital gain and it is appropriately taxed. However, durations longer than that, are included under long-term capital gains which aren’t taxed.
3. If you buy property in India as NRI, you will be required to pay property tax here as well. Stamp duty and registration fees for the purchase apply along with the property tax. However, NRIs are eligible for deductions on these fees.
4. It is advisable to get a PAN card before making any investments. A PAN card helps with the legalese and procedures in the future, especially when you’re clearing tax dues.
5. Confederation of Real Estate Developers Association of India is an organization dedicated to putting together NRIs and real estate developers. You must check the offers by CREDAI before investing, to avail the best investment opportunities.
6. You must keep in mind that when paying back a loan taken in INR, you must pay the EMI in INR as well. Ideally, you must also pay the EMIs with rent from the purchased property. Fluctuations in forex can result into loss over time, if paid otherwise.
7. Investments can be made by NRI themselves, or their relatives with Power of Attorney.
8. NRIs can also claim tax benefits just like Indian residents. They are eligible to claim up to 1 lac under Section 80C of Income Tax Act.
9. NRIs must pay a TDS on properties that are worth more than 50 lacs at a rate of 1%. Capital Gain tax is levied on the purchase of such properties as well.
10. It is highly recommended to open an RFC account beforehand for any purchases made, whether by the NRI or the relative. These accounts are specifically designed for NRI transactions where the currency might change depending on the transaction.
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