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NRI Property Investment in India – FEMA, Income Taxes & GST Viewpoints !

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:-
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:-
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
held in NRE/ FCNR (B) / NRO account maintained in India
payment can be made either by traveller’s cheque or by foreign currency notes
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.
Tax Applicability
Ø Rental
– Liable to Tax
Ø Capital
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
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.

Before Parting…

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 …

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