Before you buy a house for Mr Biswas
Larissa Fernand
What can be bought?
Residential and commercial property, but he is not permitted to engage in any business activity in real estate. Agricultural land and a farm house are not permissible.
How much can be bought?
No limit
How should it be paid for?
Remittances abroad through the normal banking channels or the NRE, FCNR or NRO account.
Holding period before it is sold?
Three years.
Can the money be repatriated?
Not if paid for from the NRO account. Money can be repatriated abroad if bought with the foreign exchange earned abroad. That too, only in the sale of two residential properties but any number of commercial properties.
What can be repatriated?
Only the original investment, the profit stays back here. But you still get to benefit with a fall in the rupee rate. Assume you put in $1,00,000 for an apartment costing Rs 31,00,000. When repatriating after the sale, the rupee rate dropped to Rs 41 to a dollar. You are entitled to take back $1,00,000 even though its value is now Rs 41,00,000.
What about tax?
An NRI will have to pay capital gains tax when selling the property.
Any RBI notification when remitting the money?
After purchase, the NRI should submit Form IPI-7 within 90 days of the transaction to the RBI. This is only if he is looking at repatriation at a later date. Once the sale is done, Form IPI-8 has to be completed and submitted to the RBI within 90 days for repatriation.
Where should the RBI application be made?
Chief General Manager
Exchange Control Department
Foreign Investment Division (III)
Reserve Bank of India
Central Office
Bombay 400 001
URL: rbi.org.in
Will an NRI have to pay tax if acquiring property in India?
The mere acquisition of property does not attract income tax. However, any income accruing from the ownership of it, in the form of rent/annual value of the house (if it is not self occupied and it is the only residential property owned by that person in India) and/or capital gains (short term or long term) arising on the sale of this house or part thereof is taxable in the hands of the owner.
Can an NRI avail of stamp duty exemption if buying a property in India?
No
Is the PAN needed when buying property?
As per Rule 114B(a) of the Indian Income Tax Rules 1962, a person has to quote his PAN in all documents for the sale or purchase of any immovable property valued at Rs 5,00,000 or more. But as per Rule 114C of the rules, an NRI need not apply for and obtain PAN for any transaction regarding the sale or purchase of immovable property.
Can an NRI repatriate the sale proceeds of an inherited property which he has sold in India?
No
Can an NRI repatriate the sale proceeds of a property he had sold in India which was purchased from his local funds?
No
Can an NRI rent out an apartment he has bought in India?
Yes. He can either opt for repatriation of the rental income or it can be credited to the NRO account. If he wants to remit the funds, he can do so via his authorised dealer or bank. This rent will be taxable subject to the following deduction:
- Repairs and collection charges: 1/4th of the Net Annual Value (rent - municipal taxes) irrespective of the amount actually spent
- Insurance premium: Amount of premium actually paid to insure the property against risk to damage or destruction is allowed fully
- Ground Rent: Payable only in case of leasehold property. Ground rent allowed on accrual basis whether paid or not. However, interest on delay payment of ground rent is not allowed
- Interest on borrowed capital: Is allowed as deduction on accrual basis even if interest is actually not paid in the previous year
- Land revenue: Any sum actually paid on account of land revenue or any other tax levied by the state government in respect of property is deductible
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