NRI Property Investment in India – FEMA, Income Taxes & GST Viewpoints !
By CA Ankit Gulgulia (Jain)
Non Residents Indians have always been keen and interested to make property acquisitions in India for either Return purpose or for staying in old age etc. If you are a NRI reading this post, know this that we will quickly sum up few FEMA Compliances, Impact of Income tax and Applicability of GST on your Property Purchase in this post.
|QUICK FACT à Overseas investments have surged 137 per cent, from USD 3.2 billion during 2011-13 to USD 7.6 billion during 2014-16.|
Ø To attract more NRI Investment in India, RBI has ensured that rules are fairly simple for NRI Investment.
Ø Purchase of Property:– Any NRI/PIO can acquire by way of purchase any immovable property (other than agricultural land/ plantation property / farm house) in India. This is General Permission with no approval from Govt / RBI Required. Hence an NRI is allowed to invest in both residential and commercial properties in India. However, any agricultural land, farm house and plantation property can be owned only if it is inherited or gifted to the NRI
Ø Transfer of Property:- NRI/PIO may transfer any immovable property in India to a person resident in India. He may transfer any immovable property (other than agricultural land or plantation property or farm house) to an Indian Citizen resident outside India or a PIO resident outside India
Ø Certain Citizens Prohibited:- Citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan, Macau or Hong Kong cannot, without prior permission of the Reserve Bank, acquire or transfer immovable property in India, other than lease, not exceeding five years.
Ø Types of Payment Channels Allowed:-
o Funds remitted to India through normal banking channel
o Funds held in NRE/ FCNR (B) / NRO account maintained in India
o No payment can be made either by traveller’s cheque or by foreign currency notes
o No payment can be made outside India
Ø Yes. Just like Normal citizen with upto 80% of Value of Property.
Ø Loan can be repaid by:-
o NRE / FCNR (B) / NRO account
o Inward Remittance of Normal Banking Channel
o Out of Property Rent Received.
Income Tax Applicability
Ø Rental Income – Liable to Tax
Ø Capital Gain on Sale of Property – If sold within 2 years of acquisition, it is liable to short term capital gains taxable at Slab Rate.
Ø If more than 2 years then long term capital gains @ 20% applicable. However, unlike short-term capital gains, exemption can be claimed under sections 54, 54 F and 54 EC
Ø TDS U/s 194IA of Income Tax Act, 1961 – Where the property is 50 Lacs or more – TDS @ 1% u/s 194IA shall be applicable also.
Ø If the Occupation Certificate (OC) is received for the Project, then NO GST Applicable.
Ø If no OC received, GST shall be applicable as 2/3rd Value of Contract liable to 18% of Tax chargeable by seller.
Ø Note that effectively it will be Rs 12 of Tax on 100 Rs of Contract.
Ø No Credit available to NRI against the lease of property as per provisions of GST.
Though the process has been largely simplified by RBI, a property decision shall always be dealt with complete documentation and broader acumen to all legal compliance is a MUST !
Happy Investing …
CA Ankit Gulgulia (Jain) is Fellow Member of ICAI, Certified IFRS & Business Valuation from ACCA UK and is Practising Chartered Accountant with 8 Years plus of Rich Experience in Audit, GST, Income Tax, DGFT, Valuation, Strategic Advisory, Matters of FEMA, FDI, NCLT, RERA, ROC, SEBI, RBI, M&A, Fundraising, Startups etc as Founder of AGA, Chartered Accountants. AGA Works in wholesome business solutions right from scratch of Company Incorporation to Compliances all under One Roof. He also takes interest in being Virtual Chief Financial Officer (CFO) for Small and Medium Enterprises for Guiding them with All Business, Tax & Strategic Business Decision Making . To Know More, Learn here or contact us at email@example.com