Source: Hindustan Times (http://bit.ly/405VpkS)

NRIs, after acquiring a property in India, should file annual income tax returns even if the income generated from the apartment is below the taxable threshold.

An NRI residing in the US, has decided to purchase a residential flat in Hyderabad to stay during annual visits. She has checked RBI rules, verified the property title, and applied for a home loan. She has authorized her father in India with power of attorney. NRIs can legally purchase residential and commercial properties in India under Foreign Exchange Management Act (FEMA) rules, but are not allowed to buy agricultural land, plantation property, or farmhouses unless acquired through inheritance or specifically approved by the Reserve Bank of India (RBI).

How to fund a property purchase

When acquiring property, if the purchase is funded from abroad, the funds should be remitted into an NRE (Non-Resident External) account.

Tax matters

Additionally, while making payment to the seller, the NRI must ensure that Tax Deducted at Source (TDS) is properly deducted on the sale consideration, even if the NRI does not regularly file tax returns in India. Failure to deduct and deposit TDS can lead to a tax liability for the buyer.

The new remittance tax

The 3.5% US excise tax on remittances by non-US citizens increases the cost of investing in India, as it is charged to the sender and not creditable in India.

Documents required to buy property in India

These are the following documents that NRIs need to have in place when they plan to buy a property in India. Passport and OCI/PIO card, PAN Card, Proof of address (both addresses), Power of attorney (if applicable).

Do your due diligence

“Before finalizing a property deal, NRIs should verify the property’s title, check for any legal encumbrances, ensure all government approvals and permits are in place, and consult a real estate lawyer. This due diligence helps avoid legal disputes, fraud, and ensures a smooth transaction,”