Buying and Selling Property in India as an NRI: Tax Implications and Regulations

As an NRI (Non-Resident Indian), you have the right to purchase and sell immovable properties in India, including agricultural land, farmhouses, and plantation properties. However, it’s essential to understand the tax implications and regulations surrounding these transactions to make informed decisions and ensure compliance.

Buying Property in India as an NRI

When purchasing a property in India as an NRI, keep the following points in mind:

  • TDS on resident sellers: If you buy a property from a resident and the sale consideration exceeds Rs 50 lakh, you must deduct 1% TDS (Tax Deducted at Source).
  • TDS on non-resident sellers (LTCG): If you purchase a property from a non-resident and long-term capital gains (LTCG) apply, you must deduct 20% TDS.
  • TDS on non-resident sellers (STCG): For short-term capital gains (when a property is sold within 2 years of purchase), 30% TDS must be deducted.
  • Home loan availability: NRIs can avail home loans for up to 80% of the property value.

Selling Property in India as an NRI

When selling a property in India as an NRI, you must pay tax on the capital gains. The tax rate depends on the holding period of the property:

  • Long-term capital gains: If the property is held for more than 2 years, long-term capital gains are taxed at 20%.
  • Short-term capital gains: If the property is held for 2 years or less, short-term capital gains are taxed at your applicable income tax slab rate.

To reduce your tax liability, you can claim exemptions under sections 54, 54EC, and 54F by reinvesting the capital gains into another residential property, subject to the following conditions:

  • Timeframe: You must purchase or construct the new property within the specified timeframes.
  • Location: The new property must be situated in India.
  • Exemption limit: The exemption is limited to the capital gains amount, not the entire sale proceeds.

Other Key Points for NRIs Buying and Selling Property in India

  • PAN requirement: A PAN (Permanent Account Number) is mandatory for NRIs selling property in India.
  • TDS by buyer: The buyer must deduct TDS at the time of payment to the NRI seller.
  • Tax deductions: NRIs can claim deductions for home loan interest, property taxes, and under sections 80C, 80D, etc.
  • Aadhaar not required: NRIs are not required to have an Aadhaar number to sell property in India.

To ensure compliance and maximize tax benefits, it is advisable to consult a tax expert when buying or selling property in India as an NRI. By staying informed about the tax rules and regulations, you can make the most of your real estate investments in the country.