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As an NRI it might have been a breeze – and quite an emotional experience – buying that prized property in your homeland in the Indian city of your choice. But it’s only just half the story behind your home purchase. There are various other aspects to pay heed to as an NRI. We list a few significant ones to make the task easier after your purchase so you can enjoy being a homeowner in India without stress.
Appointing Power of Attorney
Being an NRI means you will be out of India most of the time because you live in another country. This makes it tough to keep your home or property that you just bought, free from encroachments or legal wrangles. Anybody – sometimes a friend or relative who knows you are away – can lay claim of ownership of your property and you would be unaware of it. Upon your return, you may get a rude shock to see someone else actually living and owning your own property. And then there’s the tedious court battle to sort it out in India with your having to visit home multiple times.
In order to prevent these stressful and expensive situations, it’s wise to bestow Power of Attorney (PoA) to a trusted person in India.
In PoA, you the property owner grant or delegate the rights or power to a legal representative or attorney. So, if you cannot physically be present to process the registration of your property, your PoA can do it for you in your absence. However, you must remember that the PoA has to be a registered one which is done in the local sub-registrar’s office.
Registration of property
While the physical presence of an NRI property owner is not mandatory and the PoA can fulfill the registration process, all the authorized signatories – your PoA in your case – and the buyer need to have the documents legally recorded with the concerned authority of that area or the sub-registrar. This is to ensure you don’t default legally and lose ownership of your property at any time of your ownership. The property registration process involves the submission of all documents including the property card, original documents of the property, and proof of payment of stamp duty.
Home loan repayment
As an NRI who has bought the property in India through a housing loan, you are allowed to repay the loan EMIs through your NRE, NRO or FCNR accounts upon your return to your country of residence.
Taxes and benefits
As a purchaser of property in India, whether it’s a home or land, you are required to file your income tax returns in India even if you are an NRI. Also, you might have used your Permanent Account Number (PAN) card while buying the property. Now, post property purchase, you will need the PAN to file your income tax returns on your Indian investment.
There are two types of property purchase and their tax benefits as an NRI – buying property in India or self-use and for rental income.
Property for self-use
The property you purchased in India is considered a self-use property if it is the only property you own. So then, if you take a home loan to buy it, the interest paid on it is deducted from your total taxable income. You are then eligible to tax benefits under Section 80C of the Indian Income Tax Act. You can avail a maximum of Rs 1.5 lakh for a tax deduction. In addition to this, you will have to deduct one % TDS and deposit the amount with the Indian IT department.
Property for rental income
If you as an NRI have bought the house on a home loan and seek to earn rental income by giving it on rent, the home loan interest is deductible from the total taxable income. However, the only difference is that there is no maximum limit of Rs 1.5 lakh.
Repayment of home loan for NRIs
An NRI buying property in India can repay the loan only through their NRE, NRO, or FCNR accounts. After returning to their country, NRIs can repay through Equated Monthly Installments (EMI) through those accounts. If an NRI is short on capital, a residential Indian can transfer money to the NRE or NRO account to repay the loan. As long as an NRI has the necessary documents in place, there will be no problems in the home loan application process.
Having a smooth and enjoyable property buying experience in your homeland is dependent on how you plan to work towards ticking all the right boxes on your checklist.
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