With the Prime Minister’s ‘Pravasi Bharatiya Divas’, an increased focus to buy suitable property has been witnessed by the NRI community. Although several processes have been simplified for buying property back home, rules and regulations at the local level have to be understood.
When making one of the most important investments of their life what are some of the aspects that NRIs should keep in mind? Magicbricks takes a look at some of the basics when investing in property in Tamil Nadu.
Confirm the category
Though this may seem basic, advocates specialising in real estate transactions raise a key point. “Indians have a tendency to sign a few blank pages and even cheques and leave it with their parents before going abroad. In case there is a bank transaction in India made by their parents, during the period they are supposed to be living abroad, then the Indian Income Tax Act raises a red flag. You may not be classified as an NRI and need to give explanations to sort it out,” says Aakash Ravi, an advocate specialising in NRI realty investments.
This is because the GoI NRI clause states that to be classified as an NRI a person needs to stay in India for a period of less than 182 days amid the preceding year (April to March) and/or stayed abroad for more than 182 days.
Location
“It is always better to choose a property close to where your relatives have invested,” says Radha Seshagiri of Illam Property Consultants. “This ensures that information such as the local registrars’ office, checking the validity of the sale deed records and even regularly checking up on the property becomes easy.”
Loan repayment
Although several banks give loans after checking into different set of documents for validity, repayment is different. To repay loans, NRI’s have three accounts – NRE, NRO and FCNR, each having a different approach.
“In the NRE account funds in foreign currency are transformed into Indian Rupees. The exchange rate at the time of transaction will be used for conversion. While for a NRO account the interest income earned on the principal is subject to income tax deduction in India. The tax deducted at source is 30 per cent with other applicable surcharge,” says Seshagiri. “Funds in the latter account cannot be deported abroad. FCNR account is essentially a fixed deposit account in foreign currency and not a saving account at all”.
FEMA restrictions
Any investment by an NRI is led by the Foreign Exchange Management Act (FEMA). Thus returns obtained cannot be repatriated to India as dividends.
Source : Times of India /Kanchana Dwarakanath