Essential Tips for NRIs Investing in Indian Property

Non-Resident Indians (NRIs) looking to invest in Indian property must navigate specific legal and financial frameworks. Under the Foreign Exchange Management Act (FEMA), NRIs can purchase residential and commercial properties but are restricted from buying agricultural land, plantations, or farmhouses unless inherited or with explicit Reserve Bank of India (RBI) approval.

Funding such purchases requires channeling money through Non-Resident External (NRE) accounts, ensuring traceability and facilitating potential repatriation of funds. Home loans are accessible via Indian banks, with repayments mandated through NRE or Non-Resident Ordinary (NRO) accounts, adhering to RBI guidelines.

Tax compliance is crucial. NRIs must ensure Tax Deducted at Source (TDS) is appropriately handled during property transactions. Even if the property’s income falls below the taxable threshold, filing annual income tax returns in India is advisable to maintain a consistent tax record, simplifying future financial dealings.

Additionally, NRIs should be aware of international tax implications. For instance, a 3.5% U.S. excise tax on remittances by non-U.S. citizens can increase the cost of investing in India. Joint remittances with U.S. citizen family members may mitigate this burden.

Essential documentation includes a valid passport, Overseas Citizen of India (OCI) or Person of Indian Origin (PIO) card, and a Permanent Account Number (PAN) card for tax purposes. Understanding these requirements ensures a smoother investment process in India’s real estate market.