NRIs have the opportunity to acquire or possess property in India, subject to specific legal provisions outlined in the Foreign Exchange Management Act (FEMA). Awareness of these FEMA regulations is crucial for NRIs contemplating ownership or purchase of immovable property within the country. The FEMA, designed to regulate foreign exchange transactions, is an integral part of the process for Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs) looking to invest in Indian real estate.
Individuals often migrate abroad for employment opportunities, residing there for extended periods. Upon their return or for those still living abroad, the desire to secure their future through investments, particularly in real estate, is common. However, NRIs must consider key financial factors before making investment decisions in Indian real estate. To ensure a well-informed choice, it is imperative for NRIs to grasp these 5 crucial considerations before venturing into real estate investments in India.
Type of properties they are allowed to invest
NRIs cannot buy agricultural, plantation property and a farmhouse. However, if these types of properties are inherited or gifted to a non-resident, then only they can own it. An NRI can own commercial, residential,and industrial properties in India. Whenever they decide to buy they need to have a proof of being an NRI i.e. an affidavit; they will also need an Indian Passport or a PAN number.
Ways to pay for the property
There is good news for NRIs that the rules of the Reserve Bank of India are easy to understand. When you decide to make an investment in India, you do not require any prior permission from the authorities to buy real estate. Foreign Exchange Management Act (FEMA) holds all the rights for all these properties.
Income Tax Implications
If an NRI buys a property in India, s/he will have to pay the property tax in India. This has to be done with a stamp duty and registration fees also need to be paid for the property. If you earn money in India, it will be counted in Income tax. So, be ready to hire someone to file the IT returns in India and for all the legal paperwork.
Tax benefits
For Non Resident the income that is earned or received in India is only taxable in India. However, you do not have to pay income tax in India on the money, which is earned outside India. They can claim Rs. 1 lakh deduction under the section 80C of Income Tax Act, 1961.
Understanding of EMI and Forex
The Reserve Bank of India have allowed the NRIs to get the loans which are up to 80% of the value of the property. They will have to pay the loans in INR only. If you decide to pay in equated monthly installments (EMI) by using your personal earnings from abroad, make sure that you take care of the changes taking place in foreign exchange. The rates always move up and down, so adverse fluctuations can become a burden.
The Indian government has made things easier for NRI Investment in real estate encouraging the NRIs to connect back to their homeland.
