READY REFERENCE FOR NRI/PIO/OCI FOR INVESTMENT INTO INDIAN REAL ESTATE

Below are the common questions that generally arise in the minds of individuals residing out of India, but keen on investing into India in real estate sector. Akshar Developers endeavors to make your buying or selling real estate experience - hassle free.

Who is a NRI?
Non Resident Indian (NRI) is a citizen of India, who stays abroad for  employment/carrying on business or vocation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad is a non-resident. Non-resident foreign citizens of Indian Origin are treated at par with Non Resident Indian (NRIs).
Who is a PIO?
Person of Indian Origin (PIO) (not being a citizen of Pakistan/ Bangladesh/ Sri Lanka/Afghanistan/China/Iran/Nepal/Bhutan), who

(a)   at any time, held Indian passport, or 

(b)   who or either of whose father or whose grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955). 
Who is OCI?
a) Any person of full age and capacity: 

(i) Who is a citizen of another country, but was a citizen of India at the time of, or at any time after, the commencement of the constitution, or 

(ii) Who is a citizen of another country, but was eligible to become a citizen of India at the time of the commencement of the constitution, or 

(iii) Who is a citizen of another country, but belongs to a territory that became part of India after the 15th Day of August, 1947. 

(iv) Who is a child of such a citizen, or 

(b) A person, who is minor child of a person mentioned in clause (a) 

Provided that no person, who is or had been a citizen of Pakistan/ Bangladesh shall be eligible for registration as an Overseas Citizen of India.
Who can purchase immovable property in India?
Under the general permission granted by RBI, the following categories can freely purchase immovable property in India:

(a)  Non-Resident Indian (NRI)- that is a citizen of India residing outside India

(b) Person of Indian Origin (PIO)- that is an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan), who 

(i) at any time, held Indian passport or 

(ii) who or either of whose father or whose grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955). 

The general permission, however, covers only purchase of residential and commercial property and not for purchase of agricultural land/plantation property/farm house in India. OCI can purchase immovable property in India except agricultural land/plantation property/farmhouse.
What are the documents required for buying property?

- Pan card (Permanent Account Number) 


- OCI/PIO card (In case of OCI/PIO) 


- Passport (In case of NRI) 


- Passport size photographs 


- Address proof 

What are the Tax compliances for acquiring property?

Mere acquisition of property does not attract income tax in the hands of buyer. However, any income accruing to the seller of the property is subject to income tax as the income constitute capital gains. In this regard, buyer of the property has to deduct Tax Deducted at Source (TDS) at the rate of 1% on total consideration (as and when payments are made). Such tax has to be deposited to the government by within a due date along with the form in a prescribed manner. Further details on procedure of payment of tax and filing form is mentioned at https://www.tin-nsdl.com/TDS/TDS-Introduction.php


What is the Tax treatment for income generated from property selling or renting for NRI/ PIO/OCI?
The mere acquisition of property does not attract income tax. However, any income accruing from the ownership of it, in the form of rent (if it is let out)/annual value of the house (if is not let out and it is not the only residential property owned by that person in India) and/or capital gains (short term or long term) arising on the sale of this house or part thereof is taxable in the hands of the owner.

Do NRI/PIO/OCI have to file return in India for their property rental income and Capital Gains Tax?

The taxes have to be paid if a person isselling this property situated in India. Rental income earned is taxable in India, and they will have to obtain a PAN and file return of income if they have rented this property. On sale of the property, the profit on sale shall be subject to capital gains. If they have held the property for less than or equal to 3 years after taking actual possession then the gains would be short term capital gains, which are to be included in their total income as tax as per the normal slab rates shall be payable and if the property has been held for more then 3 years then the resultant gain would be long term capital gains subject to 20% tax plus applicable cess.

How does the Double Taxation Avoidance Agreement work in the context of tax on income and Capital Gains tax paid in India by NRI?
India has DTAA’s with several countries which give a favorable tax treatment in respect of certain heads of income. However, in case of sale of immovable property, the DTAA with most countries provide that the capital gains will be taxed in the country where the immovable property is situated. Hence, the non-resident will be subject to tax in India on the capital gains which arise on the sale of immovable property in India. Letting of immovable property in India would be taxed in India under most tax treaties in view of the fact that the property is situated in India.

Does Capital Gains Tax (CGT) apply to NRI/PIO/OCI?

Yes. Long-term and short-term capital gains are taxable in the hands of non-residents.

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