Tax Implications For Non-Resident Indians (NRIs) Investing In Real Estate
Jun 15, 2023Investments

Tax Implications For Non-Resident Indians (NRIs) Investing In Real Estate

by Godrej Properties Limited



NRI Buying Property In India 

Real estate investment tax consequences are usually different for Non-Resident Indians (NRIs). Therefore, to maximise their investment returns and maintain compliance with tax rules, NRIS must grasp the taxation landscape and the know-how about NRI tax in India.

RBI Compliance and Rules

Non-resident Indians (NRIs) investing in Indian real estate must adhere to Reserve Bank of India (RBI) guidelines and regulations. These guidelines govern various aspects of NRI investments in Indian real estate, including acquisition, repatriation of funds, and compliance with foreign exchange management regulations.

Implications of Tax

Tax implications play a crucial role in NRI real estate investments. NRIs are subject to taxes on rental income, capital gains, and property transactions in India. Understanding and complying with tax laws is essential to avoid penalties and ensure tax efficiency.

Income Tax Rules for NRIs 2024

Income tax rules for NRIs in 2024 encompass provisions related to taxation of rental income, capital gains tax on property sales, and tax deductions available to NRIs. Keeping abreast of updated income tax rules is vital for NRIs to manage their tax liabilities effectively.

Other Benefits and Subsidies for NRIs

Apart from tax implications, NRIs may also avail themselves of other benefits and subsidies related to real estate investments in India. These include incentives for affordable housing projects, concessional rates for certain categories of properties, and exemptions under specific government schemes.

Navigating the complex landscape of NRI tax implications and real estate investments requires a thorough understanding of RBI compliance rules, tax implications, and available benefits. By staying informed and seeking professional advice, NRIs can optimize their real estate investments while ensuring compliance with regulatory requirements and maximizing financial returns.

Let’s learn about tax for NRIs in detail.

Tax For NRI Buying Property In India

  • Income From Residential Property

If you rent out a home in India, the rental earning is taxable as income. However, the standard deduction for repairs and maintenance costs is 30% of the income taxed at the applicable slab rates. Property taxes paid to the municipal governments are also deductible for NRIs.

  • TDS On Purchase Of Property From NRI 

As per NRI selling property in India TDS guidelines, the buyer must withhold TDS at 20% (LTCG) or as per the applicable slab rates (STCG) on the total sale consideration. However, NRIs can claim a refund by TDS on the Purchase Of Property NRI if their tax liability is lower than the TDS deducted.

  • Double Taxation Avoidance

NRIs must consider the Double Taxation Avoidance Agreement (DTAA) between India and their country of residence. The DTAA prevents the same income from being taxed in both countries, which enables NRIs to claim relief by availing of tax benefits like tax credits or exemptions. 

  • Other Taxes

NRIs should also be aware of other taxes, such as Goods and Services Tax (GST) applicable on under-construction properties, property tax levied by local authorities, and any specific taxes or levies imposed by the state or central government.

The Final Word

It is recommended that NRIs consult with a professional tax advisor or chartered accountant who specialises in tax implications to ensure compliance with tax laws and optimise their tax planning strategies. In addition, tax laws are subject to change, so staying updated with the latest regulations is essential.

Frequently Asked Questions

1. Are NRIs required to pay wealth tax on properties in India?

Ans: No, the property wealth tax has been abolished in India from 2015-16 onwards. Therefore, NRIs are not required to pay wealth tax on their properties in India. However, other taxes, such as property tax imposed by local authorities and tax for NRI in India, may still be applicable, and it is best to fulfil such obligations according to the local regulations.

2. Can NRIs repatriate rental income and sale proceeds from property in India?

Ans: NRIs can repatriate rental income and sale proceeds from property in India, subject to certain conditions. Currently, rental income repatriation is allowed up to USD 1 million per financial year after paying applicable taxes. For sales proceeds, NRIs can repatriate the funds after deducting applicable taxes, subject to limits set by the Reserve Bank of India (RBI). It is critical to comply with the guidelines and regulations set by the RBI regarding the repatriation of funds, and it is recommended to consult with a tax advisor or a chartered accountant for proper guidance.

3. What are the tax implications for NRI investing in India?

Tax implications for NRIs investing in India include taxes on rental income, capital gains tax on property sales, and tax deducted at source (TDS) on property transactions. Understanding and complying with these tax laws are essential for NRI investors to manage their tax liabilities effectively.

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