Tax Implications For NRI On Buying Property

Investment of a considerable amount of money in buying a residential or commercial property in India by NRI has been a significant source of inflow of funds in the Indian economy. The reason behind this is obvious – cherishing the potential of capital gain and of course the attractive valuation that it offers.

Let me be clear that buying a property in India is not an easy task for either an Indian or an NRI. So if you are an NRI and are planning to invest in a residential or commercial property, you should be familiar with the Tax implication on NRI that is relevant in India. You can also get in touch with the best tax lawyers in India to know about the various rules and regulations in this regard.

Tax accountability for an NRI on residential and commercial property

As an NRI, you cannot buy agricultural land or farm. These can only be inherited as a gift. The purchase of the residential or commercial property can either be from a resident owner or from a non-resident owner.

Purchase from Resident Indian

If the property with a valuation of Rupees 50 lakh or more, is being purchased from a resident owner, then as an NRI, you have to calculate one percent of the total value of purchase at the time of full or partial payment, hold back that amount as tax at source and deposit the same with the Government tax authority within 30 days from the last day of the month in which the tax was deducted. You can take the help of NRI legal services India to guide you in computing the tax liability.

Purchase from Non-Resident Indian

In case of buying a non-resident Indian’s property in India, as an NRI, you have to hold back your tax amount even if the purchase value is less than Rupees 50 lakh. The rate at which the tax amount is to be held back is twenty percent of capital gains in case of the seller’s long term gains and thirty percent in case of the seller’s short term gains. The best tax lawyers in India can guide you through the relevant tax computing issues.

Tax applicability in India and an NRI’s country of residence

As an NRI residing in some other country but having purchased an immovable property in India, the Indian Government will be deducting the tax from you irrespective of the capital gain or rental income from the property purchased by you. You can, however, claim the credit of that paid tax amount in your country of residence as per DTAA or double tax avoidance agreements within various countries. Take the help of NRI legal services India to guide you on the same.

Compliance regarding Tax

You are to pay taxes to the Indian Government within the stipulated time period as prescribed by the Government of India after revealing in detail the capital gain or rental income derived from the immovable property located in India.

An insight into the tax amount

The tax amount on the commercial property shall undoubtedly be more in comparison to tax on residential property. It is because commercial spaces generate a decent and remarkable rental income. It reveals the NRI’s intention of making money. Hence, the tax burden is obvious in this case. On the other hand, a residential property that is self-occupied by an NRI shall amount to ‘zero’ estimated rent although he may be living abroad due to his employment.

Mode of payment for the purchase of property in India

After taking into consideration all the tax implications of purchasing immovable property in India, it is to be noted that payment for the purchase of the same is to be routed through a banking channel from overseas or from cash accumulated in your non-resident rupee account. You cannot offer a traveler’s cheque or cash in any other currency for payment of the purchase value. You can also fund your purchase by opting for a home loan in Indian currency.

To sum up, you can purchase more than one immovable property in India and there is no restriction on that. What matters most is the purpose and intention behind your purchasing that property. The tax implication on NRI solely depends on that and will affect your burden accordingly.