NRIs Guide to Buying Property in India the Easy Way
An NRI or a Non-Resident Indian can buy, property in India with ease. It’s not as complex and time-consuming as it used to be earlier, now with the help of Nimmadhi you can get all that you need doing within a few days! First, you get an insight into what property an NRI can buy, what documents are needed, how to fund the purchase, how joint ownership works, taxes for NRI property in India, POA, and all the services Nimmahi provides NRI customers who are looking to buy property in India.
What property can an NRI buy in India
To buy residential or commercial property in India is pretty easy once you have your funds sorted out. But it’s important to note that an NRI has to get special permission from the RBI and the government if they are looking to buy agricultural land, plantation property or a farm house in India.
Documentation that an NRI needs to buy property in India
The good part is that you don’t need to show too many documents when you are looking to buy property, you’ll need a valid passport, address proof, a Permanent Account Number (PAN card) and a recent photograph.
How NRIs can pay for the property they buy in India
If an NRI does not have the funds with them ready, it’s possible to get a home loan. The RBI has now granted permission to banks and housing finance institutions that are registered with the National Housing Bank to provide home loans for NRIs to buy residential property in India. All transactions have to be made in Indian currency. The loan, however, cannot be credited directly to the bank account of an NRI. It will be disbursed to either the seller’s or the developer’s bank account directly. The loan can be repaid using funds in an NRI’s NRO(Non-Residential Ordinary) /NRE(Non-Resident External) account or FCNR (Fixed Deposit Foreign Currency account) deposits.
If an NRI is making a part or full payment without a home loan, then they can do so by remitting the money through authorised banking channels from abroad. They can also use money in their NRE/NRO or FCNR accounts. Traveller’s cheques or foreign currency is not an acceptable means of payment.
Home loans can be paid by using the funds in the NRO account, remitting money through banking channels, or even from the rent earned after subletting the property.
Joint ownership of property in India
An NRI can buy property in their own name or jointly with any other NRI. The property cannot be in joint ownership with a resident Indian or with those who are otherwise not allowed to buy property in India.
NRI property tax for Indian Property
NRIs and resident Indians have different tax systems they have to follow. So, NRIs who buy property have to deduct Income Tax at 1% if the value of the property is more than 50 lakhs and this amount has to be paid to the Income Tax Department. But, if you’re buying this property from another NRI this rate is much higher. If the property is for self-use and is financed through a home loan, the interest paid on the loan is deductible from the NRI’s total taxable income. The deductible amount is capped at Rs.1.5 lakhs and NRIs can also get tax deduction benefits on the repayment of the loan.
If the property is not for self-use but to earn rental income, then also NRIs can deduct the interest on the loan from their taxable income but with no maximum limit of Rs.1.5 lakhs. NRIs can also use house tax as a deduction on their taxes. It’s also important to note that 30% of rental income is allowed as a standard deduction for repairs, irrespective if the repairs were carried out.
POA For Buying Property in India
For those NRIs who can’t be physically present in India to buy property, there is such a thing known as Power of Attorney or POA. This means that you as an NRI can choose someone close to you such as a trusted relative, friend or even colleague and allow them (legally) to complete the transaction on your behalf. They will be signing agreements and other official documents on your behalf.
To get a valid POA you have to visit the Indian Embassy of the city and country where you are located and sign the document in front of the consulate officer. The documents also requires a photograph, your left thumb impression and your signature; if it is to be considered as valid. Once this is done, you can send this POA document to India, where it has to be adjudicated. Ask your POA to maintain all the required documents for you and send it to you.