NRI Property Buying-Tax & FEMA

BUYING AN IMMOVABLE PROPERTY IN INDIA – BY AN NRI/OCI/FOREIGN CITIZEN – FEMA & INCOME TAX PROVISIONS
Background
  • For NRIs, PIOs, OCIs, India is always a preferred destination for buying an immovable property.
  • NRI’s purposes of buying a property in India are many. Some are: to settle in India after returning back to India, to settle their children in India, to buy a house for their parents or family members in India, Investment in India to fetch a good yield, to set up a business etc.
  • Otherwise also, many Non Resident Indians (NRIs), Overseas Citizens of India (OCIs), Person of Indian Origins (PIOs), Foreign Citizens, due to their personal attachment to India, keep an interest to purchase a property in India.
  • There are various provisions and regulations, which need to be taken care before/during buying/purchasing an immovable property in India by NRIs.
Income Tax Act
  • Under Income Tax Act 1961, as per the TDS provisions, buyer NRI/OCI needs to comply TDS provisions i.e. deduction of TDS before completing purchase transaction of property.
  • TDS rates vary as per the residential status of the seller of property.
  • If Seller of property is Resident then TDS is applicable @1% if property purchase amount exceed Rs 50 Lakh.
  • If Seller of property is Non-Resident then as per the provisions of section 195 of the Income Tax Act, TDS needs to be deducted @20% or @30% (depending on the period of holding of property by the Seller). Surcharge (@10% or @15%) may also applicable if property purchase amount exceeds Rs 50 Lakh or 1 Crore respectively. Cess @4% is also applicable.
  • In relation to Non-Resident Seller, due to high rate of TDS applicability, an application can be filed with the jurisdictional assessing officer for TDS Exemption Certificate (TEC) or Lower Rate TDS Certificate u/s 197/195.
  • Under the provisions of section 56(2) of the Income Tax Act, the NRI buyer (of property) need to ensure that the registration of property is not less than the Stamp Duty Value of the property as per the Stamp Valuation Authority Rules. Else, it will lead to a taxable income in the hands of buyer as gift income.
  • On deduction of TDS, the buyer NRI need to file a TDS return in relation to TDS deducted on purchase of property. This TDS return shall be filed in Form 26QB (in case of resident seller) or 27Q (in case of Non-Resident seller).
Foreign Exchange Management Act (FEMA) – RBI Regulations
  • Under FEMA, an NRI/OCI/Foreign Citizen need to be very cautious before buying an immovable property in India. They must consult some expert in this regard.
  • Under general permission, NRIs and PIOs can buy a property in India.
  • Buying property for Real Estate business activity is not allowed to anyone including NRI/OCI etc.
  • To buy an agriculture land or farm house in India, prior approval needs to be taken from RBI.
  • NRIs/OCIs can buy an immovable property in India out of their foreign funds, NRE account or NRO account.
  • Multiple & Frequent purchase/sale of immovable property in India will lead to RBI Regulations violation under Real Estate Business Activity category.
  • Citizens of India neighbor countries (ie Pakistan, China, Nepal, Sri Lanka, Hong Kong, Bhutan, Bangladesh, Myanmar etc) are not allowed to buy an immovable property in India. They need to take RBI approval for purchase of immovable property in India.
S Lohia & Associates – Services & Credentials – Wrt NRI/OCIs/PIOs/Expats Buying Immovable Property In India
  • S Lohia & Associates Expert Team is all the time available to advise various provisions in relation to Buying/purchasing and immovable property by NRIs, OCIs, Expats in India.
  • One Window service in relation to various regulations & services of Non-Resident Indians, Overseas Citizens of India, PIOs, Expats, Foreign Citizens to assist them in acquiring an immovable property in India.
  • Experience of handling NRIs/OCIs/Expats of various countries across the world in relation to their property purchase transactions in India.
  • Best Methodologies, Processes & Technologies To provide NRIs/Foreign Citizens convenient & effective services for their property transactions in India.
  • Smooth transaction and No litigation post transaction.
  • Representative Services and other value services to make the NRIs/Foreign Citizens property purchase transaction effective & convenient.
  • Having offices/access to across the India.
  • In house team of valuers, lawyers for assisting NRIs/Foreign Citizens in relation to various legal and other requirements.
  • Experience in dealing with authorities including RBI Authorities, Income Tax Authorities.
Usefulness Of Above Information

Above information can be helpful to NRIs, Expatriates, Foreign Citizens, OCIs, PIOs  etc in relation to their doubts about Property Transactions in India such as:

  • I am a Foreign Citizen. I need to know what are the provisions applicable for property purchase transaction in India?
  • As an NRI, what I need to know in relation to my intentions to buy an immovable property in India?
  • I am an NRI. I want to know salient features and regulations in relation to buying an immovable property in India?
  • TDS provisions in relation to purchase of an immovable property by NRIs, Foreign Citizens in India?
  • What are the RBI Regulations in relation to purchase of an immovable property by NRIs or Foreign Citizens in Indai?
  • TDS rates appliable in relation to purchase of immovable property in India by NRIs/PIOs?
  • How much time it takes to get a TDS Exemption Certificate from Income Tax Department in relation to TDS on purchase/sale of immovable property by NRIs /PIOs in India? How to submit TDS Exemption Certificate application online?
  • I am PIO and OCI. I need a Chartered Accountant in Delhi in relation to purchase of an immovable property?
  • Looking for CA services in relation to advisory and compliance wrt purchase of property in India?
  • Chartered Accountant in Delhi India For NRI/OCI Immovable Property Transaction?
  • NRI Income Tax Services in India for NRI TDS compliance?
  • CA in Delhi India for Power of Attorney, Property Registration Services for NRIs?
  • NRI property purchase/buying/selling transaction Tax implications, FEMA implication in India?
  • How buyers can deduct TDS u/s 195 or 194IA if they are buying property from NRI?

Frequently Asked Questions about Property Purchase in India By NRIs, Foreign Citizens

Q: What are the TDS provisions in relation to purchase of property in India by an NRI or Foreign Citizen?

Ans: Under the provisions of Income Tax Act, similar to other person, an NRI or Foreign Citizen need to comply with TDS provisions if they are buying a property in India. In this regard, he need to see that whether the seller is a Non-Resident or Resident. If the seller is Non-Resident then Section 195 TDS provisions will apply where TDS at the maximum rate is applicable e.g. 20% plus surcharge & cess in case of long term property, and 30% plus surcharge & cess in case of short term property. If the seller is Resident, section 194IB TDS provisions will apply, and he need to see that if the property sale amount is more than Rs 50 Lakh or not. If so, then TDS @1% need to be deducted.

Q: What are the TDS Forms to be submitted in case of TDS on purchase of property by NRI or Foreign Citizen?

Ans: In case of TDS u/s 195, TDS to be deposited via TDS challan Form 281 and TDS return need to be submitted in Form 27Q. In case of TDS u/s 194IB, TDS deposition as well TDS return is submitted via TDS Form 26QB.

Q: Whether TAN is required for submitting of TDS and TDS return in relation to property purchase in India by NRI or Foreign Citizen?

Ans: An NRI or Foreign citizen, purchasing a property in India, need to deduct and deposit TDS as per the provisions of section 195 or 194IB as the case may be. TDS deducted under these provisions are to be deposited with Govt of India via TDS deposit challan i.e. Form 281 or 26QB as the case may be. In case of Form 281, which is applicable if TDS is deducted u/s 195 i.e. property purchase from Non-Resident, there is a requirement of TAN. In case of Form 26QB, which is applicable if TDS is deducted u/s 194IB i.e. property purchase from Resident Indians, there is no requirement of TAN and TDS can be deposited by quoting PAN of the buyer.

Q: How many properties can an NRI (or PIO or OCI) buy in India? Whether a prior RBI approval is required before buying a property in India?

Ans: Under RBI Regulations, there is no restriction for NRIs, PIOs, OCIs to buy a residential or commercial property in India. Under FEMA/RBI Regulations, there is general permission for NRIs (including PIOs, OCIs) to buy immovable property in India other than an agriculture land or farm house property. Hence, NRIs need to seek RBI prior approval if they wish to hold any agriculture land or farm house property in India. Further, there is no restriction of number of properties that NRI can acquire or hold in India. Wrt number of properties, NRI need to take care that their property acquisition or sale in India should not be of the nature of real estate business. Real Estate Business activity is not allowed.

Q: Whether a foreign citizen or foreign national buy an immovable property in India?

Ans: Under RBI Regulations, a foreign citizen or foreign national who is not of Indian origin (i.e. other than PIO or OCI) cannot buy a property in India. Foreign national (non-indian origin) need to seek prior RBI approval for buying a property in India. However, if a foreign national (other than neighboring country citizen), who is living in India since many years, can buy a property in India without RBI prior approval.

Contacts

S Lohia & Associates Chartered Accountants 
Address : 1301, Naurang House (13th Floor),
21 Kasturba Gandhi Marg,
Connaught Place, New Delhi 110 001.
Tel No. : +91-11-43505250, 66095250
Tel Fax No. : +91-11-43505250
Mobile No. : 9810353219, 9910353219
Email Us: sulabhlohia@slohia.com