Like migratory birds, NRI come back to settle down for good at their native places. One of my friends, Deepika was living in the US for the last 13 years and used to visit India every year. She now plans to come back permanently because of practical and emotional reasons. She has decided to invest in the real estate market here because it’s always better to sort out the residence aspect first and then move onto other things.
However, she is really worried about buying a property in India because she is unfamiliar with the entire procedure and it seems like quite a daunting task with all the legal and commercial paperwork. Beginning with her citizenship, she would be treated as an NRI under FEMA (Foreign Exchange Management Act) and Income Tax Act because she is of Indian origin and lives outside India and being an NRI in India has many benefits for her. For example her salary of $3500 p.m. earned in USA is non-taxable in India. Various deductions are also available to her for home loans, education loans, insurance, taxes, donations and many others.
Benefits of Being an NRI in India
1. Any income which is earned outside India by way of occupation or investment is not taxable in India.
2. As long as the NRI pays taxes on income earned abroad, money transfer to his/her NRE (Non-Resident Rupee) account in India will be tax free and fully repatriable (principal and interest earned). Under FEMA, having a savings account is illegal, hence NRE/NRO accounts are available for them.
3. An NRI is allowed to claim a deduction of 30% for principal repayment, deduct property taxes and take benefits of an interest deduction along with stamp duty and registration charges paid for the purchase of a property.
4. If the NRI has an ancestral property in India which he/she wants to sell and reinvest the capital gains; that amount will be exempted if the money is reinvested in a housing property.
5. An NRI is taxed at 20% when they invest in Indian assets. If the income from the investment is the only income they have incurred during the financial year, and TDS has been deducted on that, then they will not be required to file an IT return. However, unlike short term capital gains, exemption can be claimed under sections 54, 54F and 54EC.
6. In case of an insurance policy, deductions will be allowed only if the policy is in the NRI’s name or his/her family’s and the premium is less than 10% of sum assured.
7. Deductions are also included for interest paid on an education loan and tuition fees for full time education in school, college and university in India.
8. Deductions are available for premium paid for any health insurance taken. This deduction is available up to Rs 50,000 for senior citizens and up to Rs 25,000 in other cases for insurance of self, spouse, and dependent children.
9. Deduction can be claimed for donations made for charitable causes.
Liabilities of NRI
According to the IT Act, all income accruing or arising from employment or investment in India will be taxed. So my friend’s following income (if any) will be taxable:
1.From any business investment.
2. Income arising from any property or asset.
3. Capital gain on the transfer of an Indian asset.
4.Salary for services rendered in India.
5.Salary payable to her by the Indian Govt. for services rendered outside India.
6.Dividend paid by an Indian company.
7.Any interest, royalty or fees received from the Central or State Government
Can an NRI buy property in India? The answer is yes, Deepika being an NRI can buy a commercial or residential property in India.
1. She does not require any special permission to invest in real estate in India. However the payment needs to be made through banking channels in Indian currency only.
2. There is also no eligibility criterion for an NRI to buy property in India but in case she plans to avail a home loan then she would be scrutinised on all relevant aspects.
3. As per FEMA & RBI she will have to maintain a NRE/NRO or FCNR bank account for transfer of funds.
4. She can purchase as many commercial properties as she can afford/buy; residential properties are capped at two.
5. To acquire agricultural land/plantation property/farm house in India, she will first have to get the approval of the Govt. and the RBI. Such property can only be owned if it is inherited or gifted to the NRI