NRI Property Investment Advisory

For an NRI purchasing Indian property personally, long-term capital gains (held over 24 months) are taxed at 12.5% under Section 112 of the Income Tax Act 1961 (without indexation, from AY 2025-26) and rental income is taxed under Section 22 with a 30% standard deduction and interest deduction under Section 24. If the property is purchased through an Indian company, the company is taxed on rental income at 25% (for companies with turnover below ₹400 crore) under Section 115BA of the Income Tax Act 1961, and capital gains are taxed at 25% for the company — which is higher than the individual LTCG rate of 12.5%. Additionally, distributing profits from the company to the NRI shareholder attracts TDS on dividends under Section 194 at 20% (or DTAA rate with Form 10F and TRC submitted). For a buy-hold-rent strategy, personal ownership is generally more tax-efficient; a company structure is justified only when the NRI plans multiple properties, requires limited liability, or intends to claim business-level deductions not available to individuals.

Yes — under Rule 28(3) of the Foreign Exchange Management (Non-Debt Instruments) Rules 2019, an NRI may borrow in Indian rupees from an authorised dealer bank in India to purchase residential or commercial property in India, subject to LTV norms prescribed by the National Housing Bank (for HFCs) or RBI (for banks) — currently up to 90% LTV for loans up to ₹30 lakh, 80% for ₹30–75 lakh, and 75% for above ₹75 lakh per RBI guidelines. The loan must be repaid either by inward remittance from abroad or from funds held in the NRE or NRO account of the borrower — direct repayment in cash or through a third party's account is not permitted. Home loan interest paid to an Indian bank by an NRI is deductible under Section 24(b) of the Income Tax Act 1961 up to ₹2 lakh per year for self-occupied property and without limit for let-out property, subject to the TDS deduction and return-filing requirements. The NRI must disclose the loan and property in their Schedule AL (Assets and Liabilities) in the ITR if their income exceeds ₹50 lakh.

Rental income earned by an NRI from Indian property is a 'current account transaction' under FEMA 1999 and can be repatriated to the NRI's overseas bank account after payment of applicable taxes in India, without any limit and without RBI approval, under Schedule 3 of the Foreign Exchange Management (Current Account Transactions) Rules 2000. The rental must first be credited to the NRI's NRO account (not directly to an NRE account, as NRO is the designated account for India-sourced income per FEMA Notification No. FEMA 5(R)/2016-RB). From the NRO account, current income — including rent — may be repatriated through the authorised dealer by submitting Form 15CA (Part B or Part C depending on amount) and, if the remittance exceeds ₹5 lakh, Form 15CB issued by a CA under Rule 37BB of the Income Tax Rules 1962. The bank will also require a self-certification that taxes have been deducted or paid, in line with RBI/FEMA requirements.

Stamp duty and registration of property documents are governed by state-specific Stamp Duty Acts (e.g., Maharashtra Stamp Act 1958, Karnataka Stamp Act 1957) and the Registration Act 1908 — stamp duty rates range from 3% to 7% of the sale consideration or circle rate value (whichever is higher), varying by state, gender of buyer, and property type. For NRI buyers, the same stamp duty rates apply as for resident buyers — there is no additional duty for non-residents. However, if the NRI is unable to be physically present in India for document registration, they may execute a General Power of Attorney (GPA) in favour of a resident Indian, which must be notarised in the NRI's country of residence and apostilled, then adjudicated at the Indian consulate or apostille authority, before it is registered in India. FEMA does not impose any additional registration or filing requirement specifically for the property purchase deed beyond ensuring that the payment was made through permitted banking channels. The difference between the circle rate and actual sale price, if the circle rate is higher, is taxable in the buyer's hands under Section 56(2)(x) of the Income Tax Act 1961 for all buyers including NRIs.

An NRI may gift immovable property held in India to a resident Indian who is a 'relative' under Section 2(77) of the Companies Act 2013 (spouse, parents, siblings, children, and certain others) without any FEMA restriction or RBI approval, under Rule 28(5) of the Foreign Exchange Management (Non-Debt Instruments) Rules 2019. From the NRI's perspective, the gift of property is not a transfer for consideration and does not give rise to capital gains tax under Section 47(iii) of the Income Tax Act 1961, which exempts transfers by gift. The recipient resident Indian, however, must evaluate Section 56(2)(x) of the Income Tax Act 1961 — gifts of immovable property from relatives are exempt from this provision, so no income tax arises in the hands of a relative-recipient. If the donee later sells the property, the cost of acquisition for capital gains purposes is the original cost in the hands of the NRI donor, as provided by Section 49(1) of the Income Tax Act 1961, and the holding period includes the donor's holding period for determining long-term or short-term status.