NRI Corner - Real Estate Investment in India for NRI

A NRI is an Indian citizen living abroad for work or uncertain durations, including those on temporary assignments with UN organisations or government entities. Non-resident foreign citizens of Indian descent have equivalent status to NRIs.

A (PIO) is someone who, regardless of their specific country of origin, either possessed an Indian passport at some point or had a father or paternal grandfather who was an Indian citizen as per the Indian Constitution or Citizenship Act of 1955.

NRIs can purchase both residential and commercial properties in India, and there are no restrictions on the number of such properties they can acquire.

Is it possible for an NRI/PIO to co-own property in India with a foreign national? An NRI or PIO, or a non-Indian foreign citizen residing outside of India can inherit and hold immovable property in India from an Indian citizen.

Under general permission, the following groups can freely buy property in India: NRIs, who are Indian citizens living abroad, and PIOs, individuals (except citizens of Afghanistan/Bangladesh/ Bhutan/ China/Iran/Pakistan/Sri Lanka) who once held an Indian passport or had Indian citizen ancestors. This permission only applies to residential and commercial property purchases.

According to the RBI, NRIs and OCIs can freely buy or sell residential and commercial immovable property in India without needing prior approval (under RBI's general permission, per Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations 2018 — Notification FEMA 21(R)/2018-RB).

Yes, under the general permission from the RBI, NRIs can buy property in India as long as the payment comes from foreign remittances or their NRE/FCNR(B)/NRO accounts (per FEMA Regulations 2018 and applicable RBI Master Direction). They need to submit a declaration to the Bank within 90 days of the property purchase.

What is the tax treatment for income generated from property selling or renting for NRI/PIO/OCI? The purchase of property itself isn’t taxed. However, any income generated from it, like rent or capital gains from selling, is taxable for the owner.

The Government of India allows NRIs/PIOs/OCIs to buy property without paying taxes. But when they sell it, taxes are applicable.

India has Double Taxation Avoidance Agreements (DTAAs) with many countries offering special tax treatment for certain incomes (typically governed by the Capital Gains article — usually Article 13 — of the applicable DTAA). In most cases, the DTAA states that capital gains from selling property are taxed in the country where the property is situated. So, non-residents selling property in India will be taxed there.

A PoA is a written authorisation for someone to act on your behalf in various matters, such as private, business, healthcare, or legal affairs. The person authorised to act is called the agent, usually a legally competent relative or friend over 18 years old. The person granting this authority is the principal or grantor. It’s important to note that a PoA does not transfer any rights or interests in a property. People often choose a PoA in case they become incapacitated.

The Capital Gains Tax (CGT) is applicable to NRIs, PIOs, and OCIs on a variety of assets, including development rights, jewellery, real estate, and land, with Tax Deduction at Source (TDS) rates of 30.9% for short-term capital gains and 20.6% for long-term capital gains (per Income Tax Act §195 read with §111A and §112; rates inclusive of applicable surcharge and cess — verify the current rate at the time of transaction). An exemption is provided for long-term capital gains from the sale of a residential property that are reinvested in another residential property within a specified period (Income Tax Act §54). This exemption is limited to the lower of the capital gains amount or the investment in a new residential property. If capital gains are invested in specified bonds such as NHAI or REC (Income Tax Act §54EC), the entire gain may be exempt subject to the statutory cap; otherwise, a proportionate gain is exempted. The Finance Act 2007 (and subsequent amendments) imposes a ₹50 lakh annual cap on §54EC bond investments.