You must first fill out and submit Form 15CA – an online application form with IT Department of India. This can be done by you or you can have a Chartered Accountant in India do this for you on your behalf.
You must then obtain form 15CB from a Chartered Accountant – this form certifies that you have paid necessary taxes on the amount that is going to be repatriated.
You must then submit both Form 15CA and 15CB to an authorized agent or bank who will help you obtain foreign currency and repatriate the same to your overseas bank accounts.
Taxation of real estate investments by NRIs is a very straightforward process and you need to know just the following 2 points to understand what taxes are applicable to you as an NRI investing in Indian real estate and when such taxes are applicable to your transactions :
1. Capital Gains Tax or Taxes on Profits from Sale of Property : When you sell a property, you are required to pay Capital Gains tax on the profits earned by you. If you have sold the property within 3 years from date of purchase, you pay 30% of total profits as Short Term Capital Gains tax and if you have sold the property after 3 years from the date of purchase, you have to pay 20% of profits as Long Term Capital Gains. This tax is calculated only on the PROFITS and not on the entire capital.
2. Taxes on Rental Income : If you are earning rental income from properties, the entire rental income is combined with your other taxable income in India and is charged at the applicable tax slab under which you fall for that financial year. In most cases, this ends up being 30% as most NRIs fall into the highest tax bracket.
You may be eligible for certain exemptions as below :
1. Capital Gains Taxes : If you reinvest the capital gains into another property within a fixed time period, you are exempt from paying any capital gains taxes. But this is subject to a number of terms and conditions.
2. Tax on Rental Income : By default, you are allowed to deduct 30% of total rental income as expenses involved in maintaining the rented property. This means that effectively, you are paying tax only on 70% of the rental income. Apart from this, if you have taken a loan on the rented property, you are allowed to deduct the entire interest being paid on that loan from the income of the property and the remaining / leftover income is then taxed.
You may have to pay 2 other types of taxes – The Wealth tax and Property Tax. But since these taxes are so miniscule, they barely affect your finances and hence you do not need to bother by studying them in depth.
Investing using a home loan can help you earn upto 100% greater ROI than investing using your own funds. In this regard, you will be happy to know that NRIs can apply for home loans in India to fund their property purchase.
Your Physical Presence is NOT Required : You don’t have to be physically present in or travel to India to apply for a loan. You can appoint a relative as your Power of Attorney to complete loan procedure on your behalf (Power of Attorney does NOT have the right to sell your property & hence you don’t have to worry).
No Penalty for Pre-Closing a Loan : You can pre-pay or pre-close the loan at any point of time without paying any penalty or damaging your credit rating india.
How Much Can You Borrow : You can fund upto 80% of property cost through a home loan. Your eligibility depends on your income and repayment capacity and there is NO LIMIT on the number of loans you can take.
How Long Does the Process Take : The entire process takes between 30 to 45 working days and can be completed entirely via 3 couriers to India and a couple of emails.
We Can Help You with the Complete Process : We take care of the entire process from start to finish which means that neither you nor your family or friends in India have to interact with the bank or bother about the paperwork and we become your single point of contact.
The entire process can be understood in 3 simple steps :
Courier your loan application along with the processing fee cheque and all supporting documents .
Once banks study your documents, verify your employment and calculate your eligibility, you will be issued a sanction letter which states the amount of loan and interest rate you are being offered and all other terms and conditions of the loan.
You must then submit both Form 15CA and 15CB to an authorized agent or bank who will help you obtain foreign currency and repatriate the same to your overseas bank accounts.You have to submit your original property documents with a few other supporting papers and pay any other applicable loan related charges to get the loan disbursed.
Use this FREE calculator below to get an instant estimate of your loan eligibility: To know a more accurate figure or any other query on home loans, feel free to consult with our in-house loan expert Nishant Cherian Paul on +91 944 959 7635 / 21 or firstname.lastname@example.org who will be happy to assist you without any obligation.
While there are various types of bank accounts that an NRI can open and maintain in India, the 2 most commonly used and popular types are the NRO Account and NRE Account. This is a brief overview of these 2 account types, what purpose each of these accounts serve and most importantly, why you as an NRI need to have both these accounts open and active in India as each is dedicated for a separate purpose as explained below.
This account is essentially used to accept and hold any income earned by you in India and any Indian Rupees received by you from any person or entity WITHIN India.
✓ Inward remittances of foreign currency into India from any foreign country can be deposited into your NRO account (i.e. you can receive payments from outside India into your NRO account).
✓ Any Indian currency earnings or payments received by you WITHIN India have to be deposited ONLY into an NRO account, as NRE account can only accept foreign currency or inward remittances.
✓ Money in this account is NOT freely repatriable, although certain balances (such as proceeds from sale of property, rental income and other repatriable earning that are deposited into NRO account) can be repatriated subject to overall limit of $1 Million per person per annum, after you have paid applicable taxes.
✓ Interest earned on the balances in this account are taxable in India.
This account is essentially used to bring money INTO INDIA from foreign countries (i.e foreign currency remittances) and to use those funds to make local payments to any person or entity in India.
✓ You can only deposit foreign remittances (and in very exceptional cases, certain permissible repatriable income generated in India), but deposits are mostly restricted to inward remittances from OUTSIDE INDIA.
✓ You CANNOT deposit Indian earnings or Indian Currency (ie.Rupees) into this account (only certain repatriable income generated in India can be deposited in exceptional cases).
✓ Any other income earned by you in India or money received from any person or entity WITHIN India CANNOT be deposited to this account (instead such earnings must be deposited only to an NRO account which is explained above).
✓ Any funds remaining in the account can be freely repatriated without prior permission or approvals.
✓ You do not pay taxes on any interest earned on this account.
NRO and NRE accounts can both be used to bring in money from outside India and to make local payments but only an NRO account can accept deposits of Indian Currency or any income earned WITHIN India (NRE account cannot accept earning accrued in India or Indian currency except in exceptional cases).
As an NRI, you should have both NRO and NRE accounts as each serves a different purpose and you WILL need both these types of accounts at some time or the other if you are actively investing or transacting in India. As the minimum balance that has to be maintained is only Rs.10,000 per account, it is quite easy and practical to have both accounts and hence we highly recommend you to do so.
For NRIs living across various parts of the world, it is neither easy nor practical to travel to India everytime they purchase or sell a property or to conduct various other financial/legal transactions that require their physical presence in India. And this is where a Power Of Attorney (or General Power of Attorney – as it is popularly known) helps.
A POA (Power of Attorney) is a legally binding and enforceable document that a NRI can use to authorize a Resident Indian to represent him in any general or specific transaction in India.
A Power of Attorney enables an NRI to empower his or her relatives in India to legally represent them and conduct all formalities related to the purchase or sale transaction on the NRI’s behalf, so that he or she does not have to travel to or be physically present in India to conduct the transaction.
✓ Purchasing Property : To execute all contracts and agreements with the builder, register your property and apply for a loan for that property.
✓ Renting Out Your Property : To lease your property and collect rent on your behalf.
✓ Selling Your Property :The right to sell your property and negotiate the sale price. It is important to note that this right to sell can be granted ONLY IF YOU EXPLICITLY state so in the GPA and can be completely excluded from the purview of the GPA if you do not want to grant the same.
✓ Applying for a Home Loan in India : Since the NRI is not based in India, the banks need a representative in lieu of the NRI to deal with and a POA can be used by NRIs to authorise their relatives in India to represent them.
✓ Any Other Matter Pertaining to Your Property : To manage, compromise, settle, and adjust all matters pertaining to your property such as paying property and income tax on your behalf, maintaining your property, and any other such property related matters.
There are two types of power of attorney : “General” and “Special” (or limited).
1) General Power of Attorney : This allows the grantor (the NRI) to empower the appointee (the NRIs relative in India) with the rights to carry out all legal acts on the former’s behalf without restricting it to a particular transaction or act and gives the appointee very broad powers to act on behalf of the grantor.
2) Special or Specific Power of Attorney : This kind of POA restricts the authority of the appointee to act only on a particular kind of transaction or to carry out a specific legal transaction for the grantor (mostly just one / single activity). This is the more commonly used format in India for real estate transactions.
CAUTION : Every act performed by your agent within the authority of the Power of Attorney is legally binding upon the persons granting it. Hence a power of attorney should be given only to a trustworthy person, preferably an immediate family member.
Do NRIs need a PAN Card to Purchase & Sell Real Estate in India?
The short answer is YES. NRIs do need a PAN card to conduct any kind of financial transactions in India.
✓ PAN or Permanent Account Number is a 10 digit alphanumeric number issued by the Income Tax Department in India and acts as a document of identity proof.
✓ The primary purpose of PAN is to keep a central record and identification of all financial transactions of a person or entity.
✓ The PAN is unique to each person and is valid for the life-time of the PAN-holder.
✓ PAN is almost mandatory to conduct financial transactions such as opening a bank account, applying for a loan, receiving taxable income such as salary or professional fees, purchase or sale of assets above specified limits etc.
You will need a PAN when you have to pay applicable taxes on the income generated by the property – either capital gains earned when you sell a property or in rental income generated on a regular basis.
You can apply for a PAN card from anywhere across the world in 3 simple steps as explained below :
Based on your citizenship status (whether you are an Indian passport holder or not), you will have to fill out the appropriate application form.
Along with a signed hard copy of the above application form, you will have to courier a set of documents that establish your identity, age, address and citizenship proof. You can either pay the fee in cash or send us a Demand Draft for the required amount.
You can chose to have the PAN card delivered to your overseas address or have it delivered to your representative in India. Fill out the form below to have one of our managers get in touch with you to send you the application form, list of documents required and then help you through the entire process.
We can help you apply for a PAN card and this assistance is provided free of charge to build a long term relationship with you. Feel free to reach out on email@example.com (Mobile : +91 944 959 7635 / 21) to get started with your application process.
India has these agreements with close to 84 countries including USA, UK, Canada, Singapore, Australia, UAE, Germany and more where any amount repatriated from India will not be taxed again (i.e. no double taxation) in the country of residence of the NRI and hence this becomes another motivating factor for NRIs to invest in the Indian real estate market.