NRI refers to an individual who is a citizen of India but resides abroad. NRIs can freely purchase immovable property in India and they also have the option of acquiring immovable property as a gift from a resident of India, an NRI or a PIO (Person of Indian Origin). However, the property can only be commercial or residential. Agricultural land/plantation property/farm house in India cannot be acquired by NRIs as a gift. Another important point to bear in mind is that there are no restrictions on the number of residential / commercial properties that can be purchased by NRIs in India.

Happykeys offers specialized services for NRIs interested in buying property in India. If you are a non resident Indian looking to buy property in India, simply enter your details in the form provided alongside and our expert property advisors will assist you in resolving your query at the earliest.

Below are the general FAQ's:

NRI is defined separately under income tax laws and under foreign exchange laws. The definition of NRI under the tax laws is relevant for all income tax related matters. The definition of NRI under the foreign exchange regulations is relevant for purposes such as banking, repatriation, investments, etc.

NRI under the tax laws: Under the income tax laws, an individual is considered as an NRI for a financial year if he is either a citizen of India or a person of Indian origin, and is a non-resident in India for that year.

An individual is considered as a non-resident in India for a financial year if:
i) He was present in India for less than 60 days in the financial year, OR
ii) He was present in India for a period of 60 days or more but for less than 182 days in the financial year AND he was in India for a period less than 365 days during the preceding 4 financial years, OR
iii) He was present in India for a period of 60 days or more but for less than 182 days in the financial year AND he, being an Indian citizen, either left India during the year for the purposes of employment outside of India or he, being a person of Indian origin or an Indian citizen, came to visit India during the year.

NRI under the foreign exchange regulations:

An individual is considered as an NRI if he is a non-resident of India for that year and is either a citizen of India or a person of Indian Origin.

An Individual is considered as a non-resident if he has left India for the purposes of taking up employment outside of India or carrying out a business/profession outside of India or for any other reason with an intention to stay outside of India for an indefinite period of time.

Yes, an NRI can purchase immovable property in India other than an agricultural land.

No, an NRI does not need to obtain permission from RBI for buying immovable property (other than agricultural land) in India.

1. NRIs are required to submit additional documents than is normally required for a resident Indian.
2. A copy of the passport
3. A copy of the works contract (also sometimes referred to as the contract card/labor card)
4. The power of attorney (POA). The POA is required because the borrower is not based in India and in such a scenario, the HFC would need a representative 'in lieu of' the NRI to deal with as required. Although not compulsory, the POA is usually drawn on the NRI's parents, wife or children

Please refer to answers to questions 11 and 13.
Also the first time individual homebuyers get tax deduction on interest of home loan (for self-occupied house), under newly inserted section 80EE of the Income Tax Act, 1961 applicable for financial year 2013-14. This is in addition to interest deduction referred to in answer to question 14.
This rebate on home loan interest is applicable only for home loans satisfying the following conditions:
i. Loan is sanctioned by a financial institution or housing finance company between April 1, 2013 and March 31, 2014.
ii. Loan amount is Rs. 25 lakhs or less and cost of residential house is Rs. 40 lakhs or less
This should be the only house owned by the taxpayer at the time of sanction.
Deduction of an amount up to Rs. 1 lakh can be claimed towards interest payable on home loan in the financial year 2013-14. If interest payable in this year is less than Rs. 1 lakh then the balance can be claimed in the following year.

The loan towards the home has to be paid upfront for the entire tenure of the loan by way of direct remittances from abroad through normal banking channels or from accounts that are allowed by RBI. Currently, payments are done through NRO, NRE, NRNR and FCNR accounts. These accounts change on the basis of RBI permissions to each HFC.

The housing finance offered to NRIs normally do not exceed 5 years. However, some HFCs offer loans for a term of 7 years. The repayment for the loan is by way of EMIs. The EMIs begin only after the entire loan is disbursed. In case of a part disbursement, you pay simple interest at the rate applicable on the loan amount that is disbursed to you.

The eligibility for an NRI is calculated on the same lines as a resident Indian. Emphasis is placed on the following for an NRI:
1. Qualifications - the NRI applicant has to be graduate
2. Current job profile & past experience
3. Probability of staying abroad for the entire loan tenure
4. Probability of servicing the loan with an extended tenure in case you have to return to India.

The income tax implications arise at the time of purchase of the property, during the period of ownership of the property and also at the time of sale of such property.

i) Income tax implications at the time of purchase of property: At the time of purchase of the property the NRI buyer may have to deduct income tax while making payment towards the purchase of the property.

If the property is being purchased from another non-resident then the NRI buyer is required to deduct income tax at the rate of 20% or 30% of the sale consideration of the property. He is also required to obtain a TDS Account Number and file TDS return for the same. Law also provides for procedures to enable the buyer deduct income taxes at lower rates.

If the property is being purchased from a resident seller then the NRI buyer is required to deduct income tax @ 1% while making payments to the buyer if the value of the property is more than Rs. 50 lakhs.


ii) Income tax implications during the period of ownership of the property:
The property may be either let out, or kept vacant or occupied by the owner himself during the period of its ownership.
The tax implications on these are dealt with in answers to question 13, 14 and 15.
It is important to mention here that the non-resident should also check the tax implications in the country of his residence as many countries tax their residents on the worldwide income.

iii) Income tax implications at the time of sale of the property:
The NRI taxpayer would be required to pay income taxes on capital gains arising on sale of the property. The law provides for certain deductions on reinvestment in capital gains tax saving bonds or in another house. The law also provides for conditions to be met to be eligible to claim these exemptions.
NRI seller may also have to suffer TDS upon the sale of his house. Under section 195 of the Income Tax Act, 1961, any person buying a property from a non-resident is required to deduct income tax @ 20% or 30%. The law also provides for procedures to receive the sale consideration without deduction of tax at source or deduction of tax at lower rates.
The NRI taxpayer, if he suffers from high amount of TDS, can file his income tax return and claim a refund of his taxes.
It is important to mention here that the non-resident should also check the tax implications in the country of his residence as many countries tax their residents on the worldwide income.

Yes, an NRI can give a power of attorney for property purchase transactions.

The amount of principal loan repaid is eligible for deduction under section 80C. However, the loan should have been taken from a bank or a housing finance company or a financial institution in India.
Note that under the tax laws, the aggregate of deductions under section 80C and 80CCC cannot exceed Rs. 100,000. Lastly, the deduction on principal repayments is revoked if the property is sold within 5 years from the end of the year I which the NRI taxpayer obtained its possession.

If the property is let out, annual the rental income from the property is included in the taxable income.

In case the house property is let out or is deemed as let out (refer answer to question 15 below), the NRI taxpayer is entitled to claim 3 deductions i) the amount of property taxes paid, ii) an allowance for the repairs and maintenance of the property (computed @ 30% of rent minus property taxes paid), and iii) the amount of interest payable on loan taken for purchase or repairs/reconstruction of the house. It is important to note here that if the loan is taken outside of India to purchase the property in India then deduction on such interest is rarely allowed. However, if the loan is taken within India the interest payable on the same is allowed as deduction. Note that there is no ceiling on the amount of deduction which can be claimed on interest payable on such loans if the property is let out or deemed as let out.
The net rental income from the property, calculated as above, is included in the taxable income of the non-resident. However, if the net income is negative then such negative income can be set-off against the positive income from other houses, if any, owned by the non-resident. Balance loss, if any, can be set-off against any other income of the non-resident.

If the property is vacant throughout the year, the same can be claimed as self-occupied. However, if taxpayers own multiple houses which are not let out for any part during the year then only one of such vacant houses can be claimed as self-occupied. The other vacant houses are deemed as let out.
For a house which is considered as self-occupied, the tax payer can claim a deduction on interest payable on purchase/repairs/reconstruction of the property only up to Rs. 150,000. Since there is no income associated with a self-occupied property, this deduction results into a tax loss from the property. This loss can be set-off against the positive net rental income, if any, from the other properties. Balance loss, if any, can be set-off against any other income of the NRI taxpayer. If the house is deemed as let out, the annual value of the house (often the amount of rent the NRI taxpayer can reasonably expect to receive from the property) is considered as notional rental income.
Deductions, as discussed in the answer to question 11 above are allowed as if the property was actually let out to arrive at the net rental income from the property.

NRIs are liable to pay wealth tax in India @ 1% on the net taxable wealth in excess of Rs. 30 lakh. Taxable wealth includes assets situated in India such as house, plot of land, motor cars, gold, jewellery, etc.
The value of one house can be claimed exempt while computing the taxable wealth. Further, if a house is let out for more than 300 days in a financial year then its value is not included in the taxable wealth.
The amount of debt outstanding in respect of taxable assets is allowed as a deduction while computing net taxable wealth.
Financial assets such as balances in banks, fixed deposits, share and securities, etc. are not included in taxable wealth.

The current regulations allow an individual to repatriate up to one million dollars from the NRO account. For most NRIs this amount would be comforting considering that for a family of 3, the total amount which can be repatriated annually would work out to USD 3 million (or Rs. 18 crore rupees assuming an exchange rate of Rs. 60).
Additionally, upon sale of a house, an NRI can repatriate the cost of up to 2 residential houses sold which were acquired by funds in NRE or FCNR accounts or through the remittances from abroad.

It has to be decided on a case to case basis but generally it is a good idea to co-own the property along with spouse.

Yes, NRIs are eligible to claim deduction of an amount up to Rs. 100,000 under section 80C of the Income Tax Act, 1961.
However, due to RBI regulations, not all the investment avenues enlisted under section 80C are available to the non-residents.



Credit: Vaibhav Sankla - Director, H&R Block India Private Limited, who is a rank-holder chartered accountant with over 16 years of experience in taxation and accounting.

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