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Non-Residents Increasingly Investing in Indian Real Estate. This surge is attributed to the temptingly low property prices and the rapid development of infrastructure and economy in India compared to other developing nations. Nonetheless, knowing the tax implications for NRIs when purchasing property can be perplexing. Therefore, in this article, we'll discuss everything you need to know about the tax implications for NRIs to buy properties in India.
NRIs are allowed to purchase certain properties in India, including residential or commercial properties. However, they aren’t allowed to purchase agricultural land, farmhouses, or plantation property; they can own such property only if they get it from a will or as an inheritance. If they seek to purchase agricultural land, farmhouses, or plantation property, they have to get approval from the RBI and the government.
Tax implications arise for NRIs engaging in property acquisition in India. To catch this concept thoroughly, it's important to determine whether the property seller is a resident or a non-resident as per the provisions of the Income Tax Act of India. An NRI purchasing immovable property in India is required to deduct TDS (Tax Deducted at Source), which is contingent upon the residential status of the seller and the type of capital gains realized.
If an NRI procures an immovable property from a resident, TDS must be deducted at a rate of 1% if the sale consideration exceeds ₹50 lakh.
On the other hand, when acquiring property from a non-resident and if long-term capital gains (LTCG) are applicable, the TDS deduction rate should be 20%. In the case of short-term capital gains, TDS should be deducted at 30%. Short-term capital gains apply when a property is sold within two years of its purchase. Any sale occurring two years or more after acquisition qualifies as a long-term capital gain.
Also, the deducted tax must be remitted within 30 days of deduction. Failure to deduct or delayed deduction of tax will incur a fine of 1% per month on the outstanding TDS amount.
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NRIs (Non-Resident Indians) have tax obligations on rental income and capital gains in India. However, the Indian Income Tax Act offers several attractive tax benefits and investment opportunities to make investing in India more appealing. Let's explore these tax-saving opportunities:
By taking advantage of these tax benefits and investment opportunities, NRIs can make informed financial decisions and potentially grow their wealth in India.
When an NRI purchases real estate in India, they are required to deduct TDS (Tax Deducted at Source). The calculation of TDS is contingent upon the residential status of the property seller and the type of capital gains realized.
Indeed, investing in real estate as an NRI presents a lucrative opportunity. Nonetheless, it's crucial for NRIs to familiarize themselves with legal provisions before owning or acquiring immovable property in the country, as outlined within the Foreign Exchange Management Act (FEMA).
