NRIs or Non-Resident Indians are citizens of India who live outside India. Living outside India as NRIs brings with it certain changes to how one handles investments and finances back home in India. Once you achieve NRI status, the way you manage finances, especially income and investments from Indian sources, changes considerably.
NRIs love to invest in India, and the two most common types of investment that NRIs participate in are mutual funds and real estate. Purchasing real estate as an NRI is quite different from purchasing real estate when you live in India. Apart from applying for an NRI home loan, there are some regulatory and tax considerations that you must keep in mind before you invest in Indian real estate.
Foreign Exchange Regulations
Investments in real estate by NRIs can be carried out keeping in mind the following regulations:
Who can invest?
Real estate investment can be made by NRIs or Non-Resident Indians, as well as Overseas Citizens of India (OCI), who is a person residing outside India holding an OCI card.
Type of Real Estate Permitted for NRI Investment
An NRI or OCI can invest in any immovable property in India, provided that it is not agricultural land, plantation or farmhouse. If you are an NRI looking to invest in a property, ICICI Bank NRI services offer NRI home loan at an attractive interest rate.
Ways to Invest in Real Estate
An NRI can invest in Real Estate via the following three means:
- Direct Purchase: An NRI can purchase real estate directly in India for investment purposes.
- Gifting: An NRI can receive real estate as a gift from a resident Indian or an NRI/OCI relative.
- Inheritance: Real estate can also be received by an NRI via inheritance from a resident Indian or a person living outside India who acquired the property according to the Foreign Exchange Regulations applicable at the time of acquisition.
Do note that an NRI or OCI cannot receive agricultural land, plantation or farmhouse from direct purchase or gifting, but they can receive the same via inheritance.
Mode of Payment
The purchase of real estate can be made through regular banking channels or via NRE, NRO or FCNR accounts. The mode of payment cannot be by way of a traveller’s cheque or foreign currency.
Repatriation of Rental Income
Any income received from real estate can be repatriated freely without any additional permissions.
Sale or Transfer of Real Estate
An NRI or OCI can transfer their property to a resident of India or another NRI/OCI. If the transfer is in the form of a gift, then the recipient must be a relative. Agricultural land, plantation and farmhouse received via inheritance can only be transferred to Indian residents.
Tax Implications of Real Estate Investment for NRIs
At the time of purchase:
No income tax is applicable on investment in real estate if the amount paid for the acquisition of property is equal to or more than the stamp duty value of the property. However, if the consideration paid for the acquisition is lesser than the stamp duty value and also more than the options given below, then the differential tax will be applicable.
- a) 5% of consideration, OR
- b) Rs. 50,000
Rental Income:
Rental income received from any property situated in India has to be taxed under the head ‘income from house property’ when filing income tax.
So, if you’re an NRI looking to invest in real estate in India, make sure you remember the points given in this blog and have all the information before making your investment. You can apply for an ICICI NRI home loan and make your dream come true.
