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How home loan helps a non-resident Indian’s to buy property in India

NRI home loans in india
NRI Home loans in India

Buying an own house is everyone’s dream. If you are a non-resident Indian you can also buy a property in Indian without any worries..!! Indian real estate transactions managed by Reserve Bank of India. These investments come under the jurisdiction of foreign exchange management act. (FEMA).  Here is the information about NRI investment property in India-

         Who marked as non-resident Indian?

Indian citizen who lives outside India are non-resident. Let’s know about the rules of real estate investments for them.

        Is buying property in India is allowed to non-resident Indians?

Off course yes, a commercial property and residential property both a non-resident Indian can purchase.

   Non-resident Indian investors require permission from the Reserve Bank of India for purchasing    property in India?

No, Non-resident Indians do not require permission from the Reserve Bank of India to purchase commercial or residential property in India.

      A non-resident Indian, how many properties they can purchase in India?

There is no limit set on the number of buying properties by non-resident in India. But there is a category that non-resident Indians cannot opt to purchase. Agricultural land, farm house and plantation land in India, they are not allowed to purchase these ones. But they can inherit such property.

     Let’s see, is home loan is helpful for non-resident Indian in buying property in India.

Yes, a non-resident Indian can apply for home loan to purchase property in India. EMI you can pay in these ways-

  • Through regular banking channels, you can transfer money from an overseas bank account.
  • From the rental income which you earn from the property, you can pay the EMIs.
  • From your local relative’s bank account, cheques can be issued towards the EMI payments.

          Income Tax and house property in India

  • As per the Indian Income Tax Act, if an individual resident or Non-resident Indian owns more than one house property, only one of these properties will be considered as self-occupied. A self-occupied property is exempt from Income Tax.
  • A second property held by an individual will be deemed as given on rent, irrespective of whether it really is rented or not.
  • In case you have not given the second property on rent, you will be required to calculate deemed rental income earned on the property. This calculation is based on specific valuations that are prescribed under Income Tax regulations. You will need to pay taxes based on this calculation.

         Investment options for NRI

               NRIs can invest in-

  • Bank Deposits.
  • Secondary markets through Portfolio investment in equity shares/convertible debentures.
  • New issues under the 24% and 40% schemes (shares/convertible debentures) Non-convertible debentures.
  • Mutual Funds– provided that the amount is invested out of an NRE/FCNR/NRO account or by inward remittance.
  • Domestic (NRO) funds through deposits in Indian companies (including Non-Banking Finance Companies (NBFCs) if they are registered with the Reserve Bank of India) on a non-repatriation basis of up to three years subject to certain formalities to be completed by the concerned company.
  • Government bonds – provided that the amount is invested out of an NRE/FCNR/NRO account or by inward remittance.
  • Proprietary or partnership concern in India.
  • Immovable property provided that the amount is not invested for the purchase of agricultural land, plantation property or farm houses and investments are made from a fresh inward remittance or an existing non-resident account.

         Taxable Income of NRI – NRI Taxation (Benefits and More)

The income tax rules applicable for NRIs (Non Resident Indians) differ from that of the   resident Indians. It is important to note that NRIs should pay taxes for capital gains or income they earn in India. According to the Income Tax department, an individual is categorised as a non-resident Indian under specific conditions as listed below-

  • He or she lives outside India for 182 days in the previous year.
  • He or she does not stay in India for 60 days during the previous year and 365 days or more for four years prior to the previous year.

        Taxable Income of NRIs-

According to Foreign Exchange Management Act and Income Tax Act, 1961, a NRI can should taxes under specific conditions as listed below-

  • Taxable income in a financial year in India is above Rs.2 lakh (exemption limit).
  • Long-term or short-term capital gains earned from the sale of any property.

       Deductions Unavailable to NRIs-

   NRIs cannot avail of the following deductions available under the IT Act, 1961

  • Investment under RGESS under section 80CCG.
  • Differently-able under Section 80U, Section 80DD and Section 80DDB.

       Investments which are unavailable to NRIs are listed below-

  • Senior Citizen Savings Scheme.
  • National Savings Certificates.
  • Post Office 5 Year Deposit Scheme.
  • Public Provident Fund.

      Are NRIs allowed to deal in stocks and shares in India?

       Yes, NRIs can invest in shares and stocks through-

  • Direct Investment: An NRI can directly put money in shares and debentures of Indian companies on a repatriable or non-repatriable basis, which means these shares, may or may not be transferred to the NRI’s country of residence, respectively.
  • Portfolio Investment Scheme: An NRI can invest in the secondary market by buying shares of an Indian company from other investors through a stock broker in an authorised stock exchange.
  • Government bonds: An NRI can also invest in government securities, certificates and units of UTI through remittances from their domestic accounts or remittances from abroad.

         How are payments made?

          An NRI can use the following accounts in order to invest-

  • NRE Account (Non-Resident External Rupee Account).This is a Savings Account that allows the NRI to securely transfer his/her earnings to the Indian market and to repatriate the income from funds.
  • NRO Account(Non-Resident Ordinary Rupee Account). The interest earned from the account is subjected to tax and repatriation is limited.
  • FCNRAccount (Foreign Currency Non-Resident Account). This is a high-interest rate Fixed Deposit account where NRIs can invest using foreign currency.

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Sheetal Pawar

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