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In recent years, the NRI community has been investing in Indian real estate significantly. The rules and regulations for investing in Indian real estate have also been modified in recent years. This has been done to ease up the process of investment. However, the NRIs need to be aware of certain aspects, when they invest in real estate in India.
The depreciation of the value of the rupee against the dollar is one of the reasons leading to the high investments in real estate in India. However, the business environment in India has also become more transparent, with regulations made by RERA coming into play. GST has also been imposed on the real estate industry, making the transactions clear and transparent. Accountability and efficiency have increased manifold in the last few years, due to which the NRIs are willing to buy properties in India.
Here are certain aspects NRIs need to be aware of, when they invest in Indian properties:
Power of attorney (PoA)
In case an NRI is not able to be present physically in India during the transaction, a PoA is required. This enables another person to make decisions and act on behalf of the NRI. The person living abroad is able to manage the assets in India seamlessly, as the responsibility is delegated. PoA is used in various situations, like dealing with lease, mortgages, sell, borrowing, collecting rent and dealing with disputes. At times, you may have to take certain actions due to decisions taken by banks and enter contracts. In order to do away with disputes, the government is planning to make amendments in the laws and make registration a mandate under these circumstances.
India has already signed agreements for the avoidance of double taxation with more than ninety nations across the world. It is possible for an NRI to claim tax credit on taxes that they pay in India, or income generated from an immovable property in the country where the person is residing. The NRI shoulders the liability to pay tax on the capital gains in India. In case he or she holds an immovable property for more than 2 years, it will be considered as a long-term capital asset. As an indexation benefit, these properties are to be taxed at 20%. Besides, they are also eligible for certain benefits as per the Income Tax Act (Section 80C to 80TTA).
Making investments in real estate in India is not as challenging as it used to be earlier. With the regulatory measures coming into force, the sector has become more transparent. Investments in property can now be made in a better environment. It is important to consider the regulations under the FEMA (Foreign Exchange Management Act) while making investments in Indian real estate.
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