Real Estate

A General Idea of NRI Giving His House On Rent

An NRI can buy property in India with ease. It is not as complicated and time-consuming as it used to be previously! However, there are certain legal provisions that the NRIs should be aware of about the purchase or owning of a property in India under the Foreign Exchange Management Act.

Why NRI investment in Indian Real Estate is a good deal?

NRI Giving His House On Rent

Before you pledge to purchasing property in India, you may want to ensure that you are making the correct investment decision.

There are several avenues of investment individuals are faced with: real estate, and gold. To assist you to decide which option will give you the most returns on your investment, here’s a wide-ranging comparison among all three.

1] Why does real estate win?

In India, gold and real estate have been two main investment options for best returns traditionally. But, selecting between the two has always been a moderately hard choice for most investors.

Reasons as to why real estate proves to be a much better investment option, in the long run, are as follows.

  • Rental income is one of the best ways to make passive income. Investments in residential or commercial real estate assist achieve this goal. Gold can be sported, but it does not bring in a stable income, like real estate which guarantees cash flow via rental returns.
  • Home loans taken to buy real estate become entitled to tax deductions on their interest and principal repayments up to a definite limit. This further increases the lasting gain on the property investment. An investment in gold, in contrast, does not come with any tax benefits.
  • A home worth Rs. 60 Lakhs can be bought with a down payment of just Rs. 13 Lakhs and the balance amount can be obtained easily as a home loan from financial institutions and banks. Home loans are also the cheapest loans available in the market and decrease the debt burden significantly as compared to other loan types. Purchase of gold, on the other hand, includes a 100% upfront payment and no banks offer financing to allow the purchase of gold.

So, if you are looking for larger returns, property investment is a much better option for the NRI investor.

2] Documentation that an NRI requires to buy property in India

The best thing is that you do not need to show several documents when you are searching to buy a property. All that you need is a valid address proof, passport, a Permanent Account Number (PAN card) and a current photograph.

3] Joint ownership of property

An NRI can purchase property in their name or with any other NRI jointly. However, the property cannot be with a resident Indian or with those who are not permitted to purchase property in India in joint ownership.

4] NRI giving 1rk for rent in Bangalore

Property is a preferred Indian asset class and one of the primary reasons for this is its capability to generate regular cash flows via rent.

  • An NRI can buy a property in India, other than plantation property, agricultural land or farmhouse as per the permission of the Reserve Bank of India.
  • The property can be purchased from funds lying in the NRO/NRE accounts. On the other hand, he can repatriate the funds through normal banking channels directly by way of inward remittance. He cannot, however, get the payment done by way of travelers’ cheques and foreign currency notes.
  • If the property is purchased for more than 50 lakhs, the NRI will need to withhold tax at source at 1% from the payment made to the trader and deposit it to the credit of the government in support of the trader. This is applicable to residents and NRIs.
  • AN NRI can let out his 2 BHK flat for rent in Bangalore, India or any other Indian city.  
  • Credit the rent received to his NRO/NRE account.
  • The rent income is answerable to income-tax as “income from house property”. The NRI is entitled to a deduction of taxes levied by the local authority paid during the year and a further deduction of 30% afterward.
  • The renter has to deduct TDS at the rate of 30.9%.
  • The balance amount of rent is answerable to tax as per the applicable slab rates after paying attention to the threshold exclusion.
  • If more TDS has been subtracted than due tax, NRI may file your return claiming the deduction of 30% and the advantage of lower slab rates and threshold exemption.

Property for rent

5] Individuals taking 2 BHK flat for rent in Bangalore, India from NRI

When one takes a house on rent from NRI, the following points must be taken care of.

  • No RBI permission is needed by the NRI at the time of giving any property on Rent.
  • The rent income will have to be made to the NRO Account and not the NRE account of the NRI. It can be made to the NRE account, only if the individual crediting the account is also an NRI and is making it debited from his NRE account.
  • The amount of tax on rental income must be subtracted at source by the payer of the rent @ 30% and must be deposited in the account of government by the tenant only.
  • For subtracting TDS on rental income, the tenant should have a TAN number. TAN Number is a 10 Digit Alphanumeric Number. Every person liable to deduct TDS is required to apply for a TAN No. and shall quote this number in all TDS Payments, TDS Returns, and any other communication in regards to TDS with the Income Tax Department.
  • Apart from TAN, the tenant should have his PAN and PAN of NRI Seller to subtract TDS under section 195.
  • After subtracting TDS, the renter should offer a TDS certificate to the NRI for Income Tax.

For the NRI’s who are giving their flats on rent, any income earned in the form of rent from property in India comprises rental income and is taxable regardless of residential status.  The nature of taxability on the rental income will depend on how the property has been rented out.

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About the author

Michael Austin

Michael Austin is a Internet Entrepreneur, Blogger, Day Dreamer, Business Guy, Fitness Freak and Digital Marketing Specialist. He also helps companies to grow their online businesses.