A home in In­dia for NRIs

Find out about the doc­u­men­ta­tion re­quired by NRIs for buy­ing and sell­ing prop­er­ties in the coun­try and the amount they can repa­tri­ate after dis­pos­ing of a house

HT Estates - - HTESTATES - Ta­p­ati Ghose & Man­ish Tyagi

For NRIs who want to in­vest in prop­erty in In­dia, ob­tain­ing the PAN of the seller is manda­tory. The pur­chaser is re­quired to gen­er­ate a chal­lan-cum-state­ment in Form No. 26QB which is the on­line form for fur­nish­ing in­for­ma­tion re­gard­ing the taxes with­held. The pur­chaser is also re­quired to is­sue a tax with­hold­ing cer­tifi­cate in Form 16B to the de­ductee (ie the seller of the prop­erty). Where the seller is an NRI, how­ever, the buyer is re­quired to ob­tain a tax de­duc­tion ac­count num­ber (TAN) to com­ply with tax with­hold­ing obli­ga­tions. The taxes de­ducted are re­quired to be de­posited in the gov­ern­ment ac­count within seven days from the end of the month in which the tax is de­ducted.

Con­se­quences

The con­se­quences of non-com­pli­ance with the tax de­duc­tion obli­ga­tion can be harsh.

The buyer is obliged to with­hold the taxes and re­mit the same to the gov­ern­ment within the due date. Where the pur­chaser does not with­hold the tax he shall be li­able to pay sim­ple in­ter­est at 1% per month on the amount of tax from the date the same was de­ductible to the date on which tax is ac­tu­ally de­ducted. How­ever, where the pur­chaser has de­ducted the tax and has failed to re­mit the same within the due date, the in­ter­est rate ap­pli­ca­ble shall be 1.5% per month. Pros­e­cu­tion pro­vi­sions may also re­sult.

De­lay in sub­mis­sion of Form 26QB would trig­ger a fee of ₹ 200 per day for the pe­riod of de­lay, which shall be re­mit­ted by the pur­chaser be­fore sub­mis­sion of the Form 26QB. The quan­tum of fee, how­ever, shall not ex­ceed the amount of taxes to be re­mit­ted. De­lay in sub­mis­sion of Form 26QB be­yond one year from the due date could at­tract penalty rang­ing from ₹ 10,000 to ₹ 1 lakh.

Wealth tax

House prop­erty would no longer at­tract wealth tax as the Wealth Tax Act has been abol­ished from 1 April 2015.

Other re­quire­ments

While pur­chas­ing a prop­erty in In­dia, an NRI/PIO would need to be mind­ful of the ex­change con­trol reg­u­la­tions. Ac­qui­si­tion of im­move­able prop­erty in In­dia is gov­erned by the For­eign Ex­change Man­age­ment ( Ac­qui­si­tion and trans­fer of im­move­able prop­erty in In­dia) Reg­u­la­tions, 2000. NRI/PIO’s are per­mit­ted to ac­quire com­mer­cial/res­i­den­tial prop­erty in In­dia by way of pur­chase, gift or in­her­i­tance. How­ever, pur­chase of agri­cul­tural land, plan­ta­tion prop­erty, farm­houses is not per­mit­ted. If agri­cul­tural land, plan­ta­tion prop­erty, farm­house is ac­quired by way of in­her­i­tance, the same needs to be sold/gifted to In­dian res­i­dent cit­i­zens only.

Fund­ing the prop­erty

The pur­chase con­sid­er­a­tion can be paid out of funds re­mit­ted to In­dia through nor­mal bank­ing chan­nels from the bank ac­count of NRI/ PIO lo­cated out­side In­dia or from funds held in a NRE/NRO/ FCNR ac­count. No such pay­ment can be made ei­ther by trav­eller’s cheque or by for­eign cur­rency notes.

NRI/ PIOs can also take loans from banks/ hous­ing finance in­sti­tu­tions/em­ployer in In­dia for pur­chase or even f or re pairs/ ren­o­va­tion/ im­prove­ment of res­i­den­tial ac­com­mo­da­tion owned by them in In­dia. Re­pay­ment of the loan amount can be done ei­ther by way of: In­ward re­mit­tance through nor­mal bank­ing chan­nel, or By debit to the NRE/NRO/ FCNR ac­count of the NRI/ PIO, or

Out of rental in­come from such prop­erty, or

By the bor­rower’s close rel­a­tives, as de­fined in Section 6 of the Com­pa­nies Act, 1956. The im­move­able prop­erty can be given on rent in In­dia. The rent re­ceived can be cred­ited to NRO/ NRE ac­count or re­mit­ted abroad. In the event of sale of the prop­erty ac­quired, the amount can be repa­tri­ated out­side In­dia sub­ject to cer­tain con­di­tions. The amount of repa­tri­a­tion must not ex­ceed: the amount paid for ac­qui­si­tion of the im­move­able prop­erty in for­eign ex­change re­ceived through nor­mal bank­ing chan­nels, or the amount paid out of funds held in FCNR ac­count, or the for­eign cur­rency equiv­a­lent (as on the date of pay­ment) of the amount paid where such pay­ment was made from the funds held in non- res­i­dent ex­ter­nal ac­count for ac­qui­si­tion of the prop­erty.

The bal­ance amount, if any, needs to be de­posited in the NRO ac­count, on which mone­tary repa­tri­a­tion limit of $ 1mil­lion per fi­nan­cial year will be ap­pli­ca­ble. For in­stance, if an NRI pur­chased a res­i­den­tial prop­erty in 2010 worth ₹ 50 lakh, re­mit­ting funds di­rectly from his for­eign ac­count and sold the same in 2015 for ₹ 70 lakh with the cap­i­tal gains of ₹ 20 lakh, then an NRI would be el­i­gi­ble to repa­tri­ate only ₹ 50 lakh to his for­eign ac­count and de­posit the profit of ₹ 20 lakh in his NRO ac­count. The sale pro­ceeds of im­move­able prop­erty ac­quired by way of gift should be cred­ited to an NRO ac­count only. For res­i­den­tial prop­er­ties, the repa­tri­a­tion of sale pro­ceeds is re­stricted to not more than two such prop­er­ties. If prop­erty is ac­quired out of ru­pee re­sources or the loan is re­paid by rel­a­tives in In­dia the amount needs to be cred­ited to the NRO ac­count of the NRI/PIO. Cap­i­tal gains also have to be ac­cred­ited to the NRO ac­count.

Con­clu­sion

From an NRI’s per­spec­tive, be­sides be­ing at­ten­tive to main­te­nance of the prop­erty pur­chased, he also needs to be mind­ful of the reg­u­la­tory com­pli­ances.

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