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According to the regulations of FEMA and RBI, NRI is permitted to make specific investment in real estate. A NRI is allowed to do the following investment in property: 1) Any immovable property can be purchased by NRI in India other than any agricultural land, farm house and plantation property. 2) He can get any immovable property as mentioned above by gift from Indian resident, Indian citizen residing outside India or person of Indian Origin. 3) Obtain any property by inheritance. 4) He can transfer immovable property to any resident of India by sale. 5) He can transfer any agricultural land, farm house or plantation land to any resident of India by gift. 6) He can also transfer his residential or commercial property by means of gift to any person either residing in India or abroad or person of Indian origin. Sources of Finance NRIs considers financial institutions as the easy option available in India for purchasing any property; at the same time financial institutions consider NRIs as their potential clients. Financial institutions provide home loans easily, efficiently and sooner to such people as they are very much prompt at the time of repayment. Furthermore, the repayment can readily be done by inward remittance through the proper banking channel. If someone is already getting income in India from sources like rent or dividend, he/she can directly repay the loan as well. Now RBI has also predetermined these norms in home loan for Non residents who are looking forward to buying any property: A maximum of 80% amount is only financed by the financial institution. Rest should be given by NRI himself. The remittance of the amount for down payment can be done from the place of residence by normal banking channels, i.e., NRO/NRE account in India. Furthermore, the NRI has to repay his principal amount as well as interest part from that similar channel only. Tax Implications for NRIs looking for property in India NRI has to shell out stamp duty as well as registration fees at the time of purchase. He is entitled to avail all sorts of benefits at par with Indian resident on the interest paid for the home loan. However, the tax process becomes full of twists and turns if the property is leased. As the amount of income received from such action comes under the head of income from property, therefore, standard deduction is applicable as per standard slab. In this case, the NRI will have to pay the applicable tax if he is residing in the country where worldwide income is taxable unless the country has Double Tax Avoidance Agreement with India. The special advantage for NRI is the amount which is paid for the interest of home loan is deductible from NRI's taxable income without any upper limit. The NRI is legally responsible for the payment of capital Gain Tax as prescribed under the Income Tax Act, in case he sells off the property. About the author: Amit Sethi is an MBA (Fin) graduate and a Financial Consultant. He has spent 10 years in Equity research, Stock broking and Financial Consultancy Sector. He can be reached at [email protected] courtesy: www.investmentyogi.com Joseph Fernandes Mumbai Visit www.fatherspeaks.net Click: Father speaks,on LHS, below home, then click: Messages to Mother Eugenia ABBA FATHERS Feast on 07th August
