Tips for NRIs Buying an Apartment in India

Tips for NRIs Buying an Apartment in India

The Non-Resident Indian (NRI) status is hugely important from a taxation perspective. Because taxation is an evolving body of rules and regulations the definition of NRI is also prone to changes. Find out whether you qualify as an NRI or not, here.

Note: For the sake of clarity, in this guide, the term “NRI” refers to both NRIs proper and OCI cardholders unless mentioned otherwise.

Buying any property in India can be a bit complex for NRIs. You might need an apartment to house your family, or you might just prefer to have your own place when you visit India. Whatever the reason, you should keep certain aspects in mind while purchasing property in India.

What property can an NRI buy in India?

There is no restriction on buying commercial or residential property (except agricultural, farm, or plantation land). For this article, we are focusing on residential property only. Before buying an apartment, consider the following areas:

Buying Property

You don’t need any special permission to buy immovable property. The purchase can only happen in Indian currency and be paid through a non-resident account.

Paying for the Apartment

You can get a home loan. Loans can be only borrowed from banks and housing finance institutions registered with the National Housing Bank. The loan gets directly credited to the seller’s or the developer’s bank account. The repayment of the loan comes through FCNR deposits or any NRE/NRO accounts. Make sure to have essential documents while buying a property in India.

The Taxes (TDS)

Tax Deduction at Source (TDS) has to be done by you, the buyer. Depending on the property value, the tax rate you have to deduct will vary.

If you buy property from an Indian (section 194-IA), TDS at 1% applies to your property if the value exceeds ₹50 lakhs. If the seller is a non-resident, the TDS will be different (section 195). The TDS needs to be paid off before the 7th working day of the succeeding month.

Power of Attorney (PoA)

You can use PoA to buy an apartment in India. General Power of Attorney allows the allocated person to act on behalf of the NRI issuing it. Cases often arise where PoA has been misused, and now, the PoA needs to be specific in its instruction as ruled by the Apex Court of India. Visit the Indian embassy to sign documents to get a PoA.

Cash Payment

When purchasing a property, the majority of people demand a large portion of the amount to be paid in cash (black money) so that they don’t have to pay any income tax on the gain. As an NRI, you may not have such cash available to make such payments. As a wide majority of people are unwilling to accept the entire payment by check, they might not be willing to sell the property to you. Therefore, your choices of selecting a property become very limited.

Some Common FAQs related to buying an apartment for NRIs:

What documents do I need while buying?

Consider the following documents while buying an apartment:

  • Indian passport (for NRI)
  • OCI card (for PIO)
  • Proof of address
  • PAN card (for NRI)

The documents below are necessary for individual cases that may apply to you:

  • Power of Attorney (PoA)
  • Loan Sanction Letter

Am I allowed to buy property jointly with an Indian resident?

Jointly, an NRI can only buy a property with another NRI, not an Indian resident.

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