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Real Estate Investment Advisory

Want to invest in real estate in India but do not know where to look for and how to get best option within my budget…. we are here to provide you details you need to look for….

Best cities in India for Investment

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Rent Vs Buy

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Taxation on Property in India

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FAQs

Are NRIs allowed to own property in India?

Yes, NRIs can own residential and commercial properties but cannot purchase agricultural land, plantations, or farmhouses.

Are NRIs required to pay property taxes in India?
Yes, property taxes apply to NRIs owning property in India, just like resident Indians.
What are the tax benefits available to NRI property owners in India?

NRIs (Non-Resident Indians) who own property in India are subject to certain tax obligations under the Indian Income Tax Act. However, there are several tax benefits and exemptions available to NRI property.
Exemption under Section 10(38):

  1. Tax Deduction at Source (TDS) Reduction:
  2. Tax Treaty Benefits (DTAA):
    • India has Double Taxation Avoidance Agreements (DTAA) with several countries. NRIs can benefit from these treaties to avoid being taxed twice on the same income, thereby reducing their overall tax liability.
Is it possible to claim tax deductions for property maintenance and repairs for NRI-owned properties?
Yes, NRI property owners can claim a standard deduction of 30% on their rental income as per Section 24 of the Income Tax Act. This is a flat deduction allowed for maintenance, repairs, and other related expenses, irrespective of the actual amount spent. The deduction is available even if the NRI does not incur any actual expenditure on property maintenance, provided it is earned as rental income.
How does the Double Taxation Avoidance Agreement (DTAA) help NRI property owners?

The Double Taxation Avoidance Agreement (DTAA) is a treaty between India and several other countries that ensures an NRI does not pay tax on the same income in both the country of residence and India. The key benefits are:

  • Avoidance of Double Taxation: The DTAA ensures that if the NRI is paying taxes in their country of residence, they may not have to pay the same tax in India.
  • Tax Credits: In cases where taxes have been paid in India, NRIs can avail of tax credits in their home country to offset the taxes paid in India.
  • Lower TDS Rate: NRIs can provide their Tax Residency Certificate (TRC) to claim lower TDS rates on rental income or capital gains as per the DTAA provisions.
Can NRIs take home loans in India?
Yes, most Indian banks offer home loans to NRIs, subject to certain conditions.
How can NRIs sell their property in India?
NRIs can sell property to Indian residents or other NRIs, subject to taxation and repatriation limits.
How can NRIs reduce their capital gains tax liability when selling property in India?

NRIs can reduce their capital gains tax liability when selling property in India by leveraging certain exemptions and strategies:

  1. Exemption under Section 54 – Reinvestment in Property:
    • If the NRI sells a residential property and reinvests the capital gains in another residential property, they can avail the exemption under Section 54. The exemption is available for long-term capital gains (LTCG) arising from the sale of a property held for more than 2 years.
    • The new property must be purchased within 1 year before or 2 years after the sale of the original property or constructed within 3 years from the date of sale.
  2. Exemption under Section 54EC – Investment in Bonds:
    • NRIs can invest the capital gains in specified bonds under Section 54EC (such as bonds issued by NABARD, REC, etc.), which can exempt the capital gains tax to the extent of the investment, up to ₹50 lakh.
  3. Indexation Benefit:
    • NRIs selling a long-term property are eligible to claim indexation benefits for the property purchased before 23rd July 2024, which helps adjust the purchase price for inflation. This reduces the taxable capital gain. The indexed cost of acquisition (purchase price) and improvement is calculated using the Cost Inflation Index (CII) published by the government.
  4. Reinvesting in Commercial Property:
    • If the NRI invests in commercial property, they may also qualify for the Section 54F exemption, provided the entire sale consideration (not just the capital gain) is reinvested in a new residential property.
What is the process for filing taxes for NRI property owners?

NRIs who own property in India must file an Income Tax Return (ITR) under Section 139 if their total income exceeds the basic exemption limit. Here’s a simplified process for filing taxes:

  1. Determine Taxable Income: NRIs need to calculate their taxable income from rental income or capital gains from property sales.
  2. TDS (Tax Deducted at Source): Ensure that the tax deducted at source (TDS) is correctly accounted for. For rental income, the TDS rate is 30%, but NRIs can submit a TRC to apply a lower TDS rate.
  3. File ITR-2: NRIs must use ITR-2 to file returns if they have income from property or capital gains.
  4. Claim Deductions: Make sure to claim all available deductions such as those for home loan interest, principal repayment, and exemptions for long-term capital gains.
  5. Submit the Return: Once the return is filed, NRIs can either pay any outstanding tax or claim a refund, as applicable.