Purchasing a property in India from a Non-Resident Indian can be tricky compared to buying from a resident because of some legal complications. Knowing the exact procedures may come in handy. The following five tips might help you before you finalize the deal with an NRI.
Important Things to Know Before Purchasing a Property
1. Taxation – So the first and important complication is the Taxation. Who should pay tax? According to Section 195 of the income tax act (ITA), the tax applicable on sale and purchase of Immovable property from an NRI is around 20 percent depending on the total value. Please note, if the NRI is a tax defaulter then you might be paying previous taxes with 12% interest on it, so beware.
2. TAN & PAN – Irrespective of buying property from NRI, getting a Tax deduction and collection account number (TAN) is very important. If the deal happens without a TAN number, then the tax department may impose a fine on you. The seller must also have a Permanent Account Number (PAN), so make sure you have them before you initiate a deal.
3. NRO/NRE/FCNR – NRIs might often ask you to transfer funds to their Indian account saying that it will be easy for them but never if you don’t want any legal complications in the later stage. Ask them to provide their Non-Resident External (NRE) or a Non-Resident Ordinary (NRO) or Foreign Currency Non-Repatriable (FCNR) account details and transfer the funds. Do not forget to mention the provided account details on the sale deed.
4. Physically Present – The most important thing is to have the physical presence of the owner. If in case the owner is not able to make it to the register then make sure the owner has given Power of Attorney (PoA) to someone for carrying out the deal.
5. Shared Property – The rules changes if you are buying a shared property. Never pay a single person if there are multiple owners. Make sure that the funds are divided and sent to their respective accounts.
Hope these tips help you while buying your next property from an NRI. If you need help in buying, managing or selling then you may contact OwnersTown.