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Even if the property prices around the globe are on all-time low the investments in property market in India are still on a rise. To make the best out of this situation, the NRI’s or the Non Resident Indians find it a lucrative investment opportunity to buy property in India.
They feel that the investment made today will fetch them greater returns in the future. When the value of rupee falls down, the property builders and various financial institutions also come up with all kinds of schemes to attract the NRI investors. Even the government launches new schemes to invite investors from overseas as realty market is one such sector which has always been a good investment option for NRI’s.
The Reserve Bank of India allows the NRI’s and persons of Indian Origin to make investments in the Indian real estate market without taking any kinds of prior approvals. As clarified by the Foreign Exchange Management Act, a Non Resident Indian is an Indian citizen who is living outside the country. He/She is allowed to carry out certain activities in regard to the transfer and purchase of immovable property in India and enjoys almost same benefits as granted to an Indian resident while purchasing property in India.
Before investing in the Indian property market, the most important thing that needs to be done by the NRI’s is to decide the sole purpose or objective of making the investment, because the strategy devised shall be different for different reasons. In case the property is being purchased for self-use, the game plan that will be followed will vary from the one followed in case of a purchase for investment purposes only.
In case an overseas Indian wants to invest in a residential property for self-use, the best way is to either purchase a flat or buy a plot and construct a house on it. In both the cases, it is beneficial for NRI’s to make the investment by taking a loan either from a bank or a financial institution. In case of such a housing loan for a self-occupied property, the NRI can get a deduction from his Indian income in lieu of the interest paid on the loan which can be up to Rs 1, 50,000.
Another good option is to invest in a property with an aim of getting rental income for the years to come as the rental income taxation norms are much convenient and user friendly. From the rental income received by an NRI, he can get a deduction on the actual house tax paid plus a 30% special deduction for the renovation, maintenance and collection charges of the property whether you actually spend on the repair work or not.
Another major advantage is that the interest paid on the property purchased and given on rent can be deducted from the rental income received. Thus it is profitable proposition for NRI’s to invest in real estate and rent out the same for a regular source of income.
If the prime motive of making an investment is to earn profit by selling the property, then the NRI should wait for at least 3 years before selling the property purchased. Because in case the property is sold within 3 years then the profits made by the NRI shall be termed as short term capital gains and shall be taxable as per the Income Tax Laws added with the other sources of income of the overseas Indian. Whereas in case the property is sold after 3 years, the profit made shall be considered as Long term capital gains for which he can avail many benefits.
Thus it is advisable for NRI’s to hold the property for 3 years before disposing it off.
As allowed by FEMA, a NRI can repatriate the money received as rental income from property investment in India or the sale proceeds of property where the investment has been made by foreign remittances.
An overseas Indian need not take any permission from RBI or comply with any legal formalities for making investments in Indian real estate provided it is not an agricultural land or farm house. He can just select on the property, make the purchase and complete the legal paper work. However he needs to have a PAN card, so that in case of rental income from Indian property investments, it becomes easy for him to clear the taxation matters.
Also a NRI needs to file an Income Tax Return in India with reference to his rental income and specifically in cases where his rental income plus the other sources of income cross the basic taxation slab. Normally an ITR should be filed by 31just July every year.
The Indian government has nowadays announced circle rates for properties in many parts of the country. An overseas Indian at the time of purchasing a property should be aware of the circle rate of that particular area because the stamp duty is always paid on either the actual price of the property or the minimum value of circle rate, whichever is bigger. In case he sells a property at a price lower than the declared circle rate, the rate shall be treated as minimum sale price and the profits arising shall be calculated accordingly.
Hence due to the depreciation of Indian rupee against US dollar, the overseas investors would find investments in Indian real estate an affordable and better option. It would be overall a delightful experience for them as now the entire process of making a purchase is easy, simple and quite hassle free complimented by innovative ways to save on you tax money. But for this it is very important that the investor should first be clear on the purpose of making the purchase.
We wish the entire nonresident Indians a wonderful time in making investments in the Indian real estate sector which would make them proud owners of property in India assuring great returns.
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