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Transferring Immovable property by NRIs: everything you must know
NRIs are limited to owning one immovable property with their non-NRI spouse.
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).
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.
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.
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.
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Transferring Immovable property by NRIs FAQ'S:
A non-resident alien (NRI) may transfer any immovable property in India to a local resident. He has the right to transfer any immovable property (other than agricultural land, plantation property, or a farm home) to an Indian Citizen or a PIO located outside of India.
Non-resident Indians (NRIs) and Indian citizens living abroad (OCIs) do not need prior authorization to acquire or sell immovable assets in India.
The NRI seller will be taxed at a rate of 21% on the sale amount rather than the profit money as LTCG. To get a refund, they must go through a lengthy process. If the transaction is classified as an STCG, 30 percent of the profit made will be subject to taxation.
A person residing in India, another NRI, or a person of Indian heritage can buy an NRI’s residential or commercial property (PIO). If the property is agricultural land or a farming development, it can only be sold to an Indian citizen who lives in the area.