NRI's OWNS PROPERTY IN INDIA (very informative, must read)
NRI Populations:
Overseas Indians, officially known as Non-Resident Indians (NRIs) or Persons of Indian Origin (PIOs), are people of Indian birth, descent or origin who live outside the Republic of India. According to a Ministry of External Affairs report, there are 32 million NRIs and PIOs residing outside India.
The NRI populations will be expected to grow 1% + every year which turns in number around 320,000 every year & this number may quite bigger in reality as india is well connected globally and poised to grow very fast in near future.
PAN CARD is Mandatory:
A PAN (Permanent Account Number) Card is mandatory not only for resident Indians but also for NRIs who wish to invest in India or have any Indian income. Let’s understand the uses of a PAN card for NRIs and OCIs.
PAN NO.
Permanent Account Number (PAN) is a ten-digit alphanumeric number, issued in the form of a laminated card, by the Income Tax Department, to any "person" who applies for it or to whom the department allots the number
Benefits of PAN for NRIs
NRIs are required to have a PAN Card for the following purposes:
- PAN card is mandatory if an NRI has taxable income in India.
- NRIs need to have a PAN card to make an investment in securities or mutual funds.
- If they wish to purchase property or vehicles in India.
- A PAN card is also mandatory to deposit amounts over a certain limit.
- PAN serves a useful purpose to simplify the KYC procedure in most banks.
- Rules for NRI who Owns or Inherit or wish to purchase property in INDIA.
*We can assist in getting PAN card for any NRI / PIO without visiting India as we have collobration with renowned and experienced legal adviser, please contact us by email deepaksundrani@thegururealty.com, cell # +91-7498829332 / +91-9822052388*
Rules related Property / Real estate Ownership in India For an NRI's:
1) BUYING OF PROPERTY: Can NRi Buy property Or get inheritance of property in india?
Nri's may own already a property in India or inherit the property from their parents or relatives or can purchase new property or can invest in real estate, provided the property they want to purchase is not agricultural land, plantation property or a farmhouse. An NRI doesn’t need to seek any specific permission from the RBI to invest in property in India, nor is he required to send any communication or intimation about the same to the RBI. The income tax laws also allow an NRI to own as many residential commercial properties as he wants. However, if an NRI wants to purchase a farmhouse or plantation, he needs to seek specific permission from the Reserve Bank of India and the RBI will consider this on a case-to-case basis.
Procedure for NRI to buy property in India
Following Documents required for NRI to buy property in India:
- Passport or OCI card: As an NRI you will need to share your passport. If you hold a foreign passport, you need to show a Person of Indian Origin (PIOs) card or Overseas Citizen of India (OCI) card to buy property in India.
- PAN card: A PAN card is mandatory to buy property in India.
- Power of attorney: If you are not in India to complete all the formalities required for the purchase of property, you need to appoint a power of attorney. A special power of attorney which is registered and notarized, not a general power of attorney, is required to execute a property transaction.
- Apart from your passport and PAN card, you will need to submit your current address proof like any utility bills and passport size photographs for the sale deed registration.
2) SELLING OF PROPERTY:
An NRI can sell his/her residential or commercial property to either a person residing in India, another NRI or a person of Indian origin (PIO). One can also mortgage the property to an authorised real estate dealer or a financial institution dealing with home loans. However, if the property is an agricultural land or farming development, it can only be sold to a resident Indian citizen.
In case the property has been inherited from an Indian resident, no special permission is required from the RBI but on the other hand, if it has been inherited from someone who is not of Indian origin, the NRI will need to seek permission from the Central Bank. Income arising from transfer of property is taxed under Capital Gains and rental income from letting out the property is taxed under the head ‘Income from House Property. The capital gain is calculated as the difference between the sales value and indexed cost of purchase.
if NRI who owns property in India and wish to sell it has to follow bit different procedure as it attracts income in India which has tax implications, here first sharing the procedures to sell as follows:
1. Hire a brokerage company to conduct a comprehensive valuation of the property and determine its value.
2. Carry out all the necessary paperwork related to the sale of the property. If one isn’t physically available then a trustworthy person can be granted PoA to do the needful.
3. Understand the tax liabilities. Capital gains are taxable in the year in which the property is transferred, irrespective of whether the sale payment has been received in full or not.
4. The taxation details have been explained in brief below:
a. If one is selling the property within 2 years (changed from 3 years after Budget 2017) of purchase, then short term capital gains tax will be applicable and selling after 2 years makes the long term capital gains tax applicable.
b. Taxes on short term capital gains are based on an individual’s income slab.
c. Taxes on long term capital gains are fixed at 20%.
d. When a resident Indian purchases a property from an NRI, then the buyer is liable to deduct TDS at 20% on long term capital gains (LTCG). In case the property is being sold before 2 years, 30% TDS will be deducted. A TAN (Tax Deduction and Collection Amount Number) needs to be obtained by the buyer before deducting the TDS.
e. In case the property has been inherited, the date of purchase by the original owner is considered for calculating whether it’s a long term or a short term capital gain. In such a case the cost of the property will be the cost that the previous owner incurred on the respective property.
5. TDS is deducted at the time of making the payment to the NRI. All the information regarding the TDS and it’s rate have to be mentioned in the sale deed between the NRI seller and the buyer.
6. The amount can be received only in a FCNR or NRE/NRO account.
7. The NRI would be exempt from tax if he/she re-invests the capital gains of the property in another property or tax exempt bonds.
*the Capital gain tax & income tax will have huge impact in absence of not having PAN Card, We can assist in getting PAN card for any NRI / PIO without visiting India, please contact us by email deepaksundrani@thegururealty.com, cell # +91-7498829322 / +91-9822052388*
Applicability of TDS on Sale of Property by NRI
i am trying to explain again TDS on sale of property in case NRI selling property because this involves huge amount if sale price and also to be properly taken care or advised else it will create great inconvenience to both buyer and seller even after completing the sale transaction and may create more problems for NRi who stays away.
Whenever any property is purchased/sold, TDS is required to be deducted. The buyer when paying the amount to the seller will deduct some amount (technically called as TDS) and pay the balance to the seller. This amount which has been deducted by the buyer would then be required to be deposited with the Income Tax Department by the buyer.
in case the seller is a NRI – the amount of TDS to be deducted would depend on the quantum of money received by the seller.
TDS on Sale of Property by NRI is required to be deducted as per the rates mentioned below:-
| Nature of Capital Gains | Description | TDS Rate on Sale of Property by NRI |
| Long Term Capital Gains | Property held for more than 2 years | 20% |
| Short Term Capital Gains | Property held for less than 2 years | Income Tax Slab Rates of Seller |
Surcharge and Cess would also be levied on the above amount.
Therefore, the effective rate of TDS on sale of property by NRI in case of Long Term Capital Gains would be as follows:
| Particulars | Property Sale Price (Rs.) | |||
| Less than 50 Lakhs | 50 Lakhs to 1 Crores | More than 1 Crores | ||
| Long Term Capital Gains Tax | 20% | 20% | 20% | |
| (Add) | Surcharge | Nil | 10% of above | 15% of above |
| Total Tax (incl Surcharge) | 20% | 22% | 23% | |
| (Add) | Health & Ed. Cess
| 4% of above | 4% of above | 4% of above |
| Applicable TDS Rate (incl. Surcharge & Cess) | 20.8% | 22.88% | 23.92% | |
| Particulars | Property Sale Price (Rs.) | ||
| 1 Crore to 2 Crores | 2 Crores to 5 Crores | ||
| Long Term Capital Gains Tax | 20% | 20% | |
| (Add) | Surcharge | 25% of above | 37% of above |
| Total Tax (incl Surcharge) | 25% | 27.4% | |
| (Add) | Health & Ed. Cess | 4% of above | 4% of above |
| Applicable TDS Rate (incl. Surcharge & Cess) | 26% | 28.496% | |
In case of Short Term Capital Gains (i.e. if the Property has been held for less than 2 years by the seller), this Surcharge and Cess would be added to the applicable Tax Rate as per the Income Tax Slabs in the same manner as explained above for Long Term Capital Gains.
This TDS is required to be deducted whenever any payment is made to the NRI for purchase of property. Even if any advance is being paid for purchase of property – TDS is required to be deducted.
This TDS is required to be deposited by the buyer with the Income Tax Dept stating that this is the TDS which he has deducted from the payment made to NRI.
Moreover, this TDS on purchase of Property from NRI is required to be deducted irrespective of the Transaction Value of the Property. Even if the value of property is less than Rs. 50 Lakhs – this TDS is required to be deducted.
Amount on which the TDS is required to be deducted
The TDS on sale of property by NRI is required to be deducted under Section 195 and is ideally required to be deducted on the Capital Gains. However, this computation of Capital Gains cannot be done by the Seller himself and should be done by the Income Tax Officer.
The seller shall file an application in Form 13 with the Income Tax Dept and request them to compute his Capital Gains. The procedure for filing of this form is a bit complicated and the seller can take the services of a chartered accountant for filing an application with the Income Tax Dept.
The Income Tax Department will compute the Capital Gains of the seller and will issue a certificate for Nil/ Lower deduction of TDS depending on the capital gains arising on the sale of property.
The seller is required to give this certificate to the buyer and the buyer will deduct the TDS as per the rates mentioned in the income tax certificate.
In case this certificate is not obtained by the seller from the Income Tax Department, the TDS should be deducted on the Total Sale Price and not on the Capital Gains. Therefore, it is very important for the seller to obtain this certificate from the Income Tax Officer.
It is advisable that the details of the TDS deducted shall be mentioned in Property Sale Agreement. It should also be noted that it is not the responsibility of the Property Registrar to ensure the TDS Deduction. The Registrar will register the Sale Agreement even if the TDS is not deducted or wrongly deducted.
If the TDS is wrongly deducted or not deducted, the Income Tax Dept will not do anything to the seller but will catch hold of the buyer of property to deposit the TDS. If the buyer forgot to deduct the TDS or deducted less TDS – the Income Tax Dept will recover the TDS from the buyer.
(PS: We also help NRI’s file Form 13 for reducing the TDS Rates and you can hire us for filing application for lower deduction of TDS.) please contact us by email deepaksundrani@thegururealty.com, cell # +91-7498829332 / +91-9822052388*
TDS Payment, TDS Return and TAN No.
There are a lot of compliances to be taken care of when buying a property from a NRI. Firstly, the buyer should have a TAN No. for deduction of TDS. TAN No. is not required in case the property is purchased from a Resident Indian but is mandatory in case the property is purchased from a Non Resident Indian.
TAN No. stands for Tax Deduction and Collection Account No. and is different from a PAN No. Only the buyer is required to have this TAN No. and not the seller. In case the buyer does not have the TAN No., he should apply for the same before deduction of TDS. It is important to note here that in case there are 2 buyers, both of them would be required to apply for a TAN No. (Recommended Read: What is TAN No. and procedure to apply for TAN No.)
The TDS so deducted by the buyer shall be deposited with the Income Tax Dept within 7 days from the end of the month in which the TDS has been deducted. For example: If TDS is deducted in the month of June, then the TDS should be deposited with the Income Tax Dept on or before 7th July.
This TDS is required to be deposited along with Challan No./ ITNS 281 and can be deposited online as well as through various bank branches. TDS can be deposited online through this link – https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp
After the deposit of TDS, the buyer is required to furnish a TDS Return. This TDS Return is required to be furnished in Form 27Q and is required to be furnished separately for each quarter in which the TDS has been deducted. This TDS Return is required to be deposited within 31 days from the end of the quarter in which the TDS has been deducted. (Recommended Read: Procedure for filing TDS Return).
After the deposit of TDS and filing of TDS Return, the buyer is also required to furnish Form 16A to the seller of property.
Things to be taken care of by the Seller
The following points should be kept in mind by the seller with respect to the deduction of TDS on Sale of Property by NRI
Try to get the Certificate from the Income Tax Department for computation of Capital Gains which will lower the TDS to be deducted.
The Income Tax Officer may take around 2 to 4 weeks to issue to certificate for lower deduction of TDS and will ask for various documents for checking details like Purchase Price, Date of Purchase, any expenses on Renovation/ Construction etc.
In case the Seller is unable to get the Certificate, the TDS would be deducted on the Sale Value and will lead to excess deduction of TDS.
Apart from the Property Registration Documents, the seller should also collect Form 16A from the Buyer.
The seller can reduce his Capital Gains which will lead to lesser TDS and Tax Liability if the seller intends to reinvest the Capital Gains in India.
In case the seller does not opt for this certificate, he can also apply for Refund of the excess TDS deducted at the end of the year.
In case there are 2 sellers (i.e. Co-owners), both of them would be required to file Form 13 separately for reducing the TDS Rates.
Things to be taken care of by the Buyer
There are a lot of responsibilities of the Buyer in case of purchase of property from a NRI. The buyer shall:-
Deduct TDS at the time of each payment and not at the time of Registration of Property
The TDS so deducted shall be deposited with the Income Tax Dept as per the schedule for deposit of TDS.
TDS Return shall also be furnished with the Income Tax Dept as per the schedule for filing of TDS Return
The Buyer shall also issue Form 16A to the seller after filing the TDS Return. Form 16A is a TDS Certificate which states that the buyer has deposited the TDS with the seller.
In case of late payment of TDS – interest would be levied @ 1%/1.5% per month
In case of late filing of TDS Return – Penalty of Rs. 200 per day would be levied. The Income Tax Officer may also levy a penalty of upto Rs. 1 Lakhs.
In case of Home Loan, TDS is to be deducted when payment is made to the Seller and not when the EMI is paid to the Bank.
Assistance:
Further, We are also professional real estate consultant having experience of more than decade & half and can assist in entire process related to PROPERTY IN INDIA and can be a complete one stop solution of above discussed various procedures and even assist in getting following services with our collaboration with very experienced legal advisers to conclude any such transaction smoothly.
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it requires extensive research and experience to choose best available option at the given time as opportunity always keep changing. in this case, we can assist prospective buyer in 2 ways:
Option 1) Pure consultancy on fixed fee basis: in this way, we will assist buyer to find best project and property as per his preferences & budget as buyer may already reached to builder & negotiating so we can not be paid by builder so in this case fixed fee will be charged to buyer in advance before giving the consultancy then buyer can directly approach to builder to finalize the property.
Option 2) We involved as a Brokering company: in this way, prospective buyer will visit through us to each project and we will be registered reprsentative with builder for buyer so in this case, buyer has to pay nothing for our same consultancy services which we were giving in above option 1, even we will refund fee which we receive from buyer for option 1.
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- helping missing property documents index2, purchase/sale agreements in PUNE city only.
- PAN card for any NRI / PIO without visiting India,
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hope able to explain our point of view, still any query, please contact anytime on given contact number for detailed Discussion, cell no./whatsapp # +91-9822052388 / +91-7498829332, Email: deepaksundrani@thegururalty.com.
There are many Advantages & Benefits to hire professional consultant which can be experienced only after hiring right person.
Rest assuring here that we work very ethically, honestly and professionally and for us, our client interest is utmost and foremost then anything else. We have already successfully assisted many NRI’s, EXPATS INVESTORS & LOCALITIES to purchase property in both Mumbai & Pune cities as per their requirements & preferences and most of them are with us to manage their properties through us only so one can judge the level of trust & integrity we have in our work & services.
wishing everyone good health and happyness.
Warm Regards,
Deepak Sundrani
NRI can avail TDS exemption or lower deduction certificate from Income Tax department subject to fulfillment of certain conditions. By this way NRI can un-block their huge money and can relax. At SCS consultancy services we offer all the services related to NRI taxation wrtie to us scs.mailus@gmail.com or whatsapp your requirement at 9819642668.
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