Guidelines for NRIs to Buy Property in India

If you're an NRI (Non-Resident Indian) interested in purchasing Property in India, you must follow specific guidelines and rules. According to the 2018 Foreign Exchange Management Regulations, NRIs can invest in India's residential and commercial real estate. However, there are restrictions on agricultural properties, such as farmhouses, agricultural land, and plantations.

What Property Can NRIs Buy?

NRIs are allowed to buy:

Residential Properties: Flats, villas, plots, and apartments
Commercial Properties: Office spaces, shops, and commercial buildings

However, agricultural properties such as farmhouses, agricultural land, and plantations are off-limits for NRIs.

Documents Required for NRIs to Buy property

When buying Property in India as an NRI, you don't need a lot of documents, but the ones you need are essential:

Indian Passport: A valid passport is mandatory.
PAN Card: A Permanent Account Number (PAN) card is required.
Address Proof: Proof of your current address is necessary.
Recent Photograph: A current photograph is required for paperwork.
Work Permit and Income Proof: You may also need your work permit and recent payslips or income tax returns.

If purchasing an existing property, you must also provide documents such as the title deed and a No Objection Certificate (NOC) from the housing society.

Special Power of Attorney (POA)

If you cannot physically be in India to complete the property transaction, you can grant a Power of Attorney (POA) to someone you trust. This person can be a relative, friend, or colleague who will act on your behalf. They will handle all official paperwork and sign agreements for you.
To issue a POA, visit the Indian Embassy in your country, complete the process, and send the POA document to India, where it will be legally processed.

NRE and NRO Accounts

It's highly advisable for NRIs to maintain both NRE (Non-Resident External) and NRO (Non-Resident Ordinary) accounts:

NRE Account: This allows you to transfer your foreign earnings into India. The interest earned on this account is tax-exempt.
NRO Account: This account helps you manage any income you generate in India, such as rental or other earnings.

Joint Ownership Rules

An NRI can purchase property in their name or jointly with another NRI. However, joint ownership with a resident Indian is prohibited unless the co-owner can buy Property in India.

Tax Implications for NRIs

When buying property, it's crucial to understand the tax regulations:

TDS (Tax Deducted at Source): NRIs are subject to a 20% TDS when buying Property in India. This tax applies to the total value of the property, including amenities and parking.
If the property is worth less than Rs 50 lakhs, the TDS is reduced to 1%.
NRIs can also claim tax deductions on home loan repayments and interest payments.The deduction limit is Rs 1.5 lakhs.

Repatriation of Funds

NRIs should know the rules for repatriating funds back to their home country. You can repatriate an amount equal to what you paid for the property. However, the funds must come from an NRE or FCNR (B) account, and the transaction should comply with FEMA (Foreign Exchange Management Act) guidelines.

How Can NRIs Pay for Property in India?

NRIs have several options for financing their property purchase in India:

Home Loan: NRIs can apply for home loans through approved banks and housing finance institutions in India. The loan will be disbursed in Indian currency and sent directly to the seller or developer.
Direct Payments: NRIs can also make payments from their NRE/NRO or FCNR accounts or via remittances through authorized banking channels.

Continuing Ownership of Property

Even after becoming an NRI, you can continue owning Property in India. Ensure you keep all necessary documents, pay property taxes, and clear utility bills on time. If you appoint a representative in India, they can manage any legal issues related to your property.