The word Repatriate means to send someone/something back to their/it’s home country. We often hear NRIs fussing over ways and the extent to which they can repatriate their Indian income from the property. There is a fair amount of confusion around the tax treatment to be given to property owned by NRIs in India.
Thus, for clear understanding, one must be able to identify a ‘non-resident Indian’ status. A non-resident Indian (NRI) is a citizen of India who holds an Indian Passport and has temporarily emigrated to another country for 6 months or more for employment, residence, education or any other purposes. To be precise, he/she must stay outside India for more than 182 days during the preceding financial year, between April 1st to March 31. For an NRI, income earned/collected in India exceeding rupees 250000 (excluding income taxable at a special rate like capital gain) is chargeable to tax in India.
NRIs tend to invest money in real estate in India. However, not all of them are aware of the tax implication of their properties in India.
Property income in India may be from two types of sources. Either by renting out the property or selling it off.
Income tax on Rent received by NRIs is taxable under the head House Property and is levied the same way as it is for Resident Indian.
Capital gains to the NRIs will be either short term or long term based on the period of holding of the asset (property). In the case of capital gains, the cost of the property is the cost to the previous owner.
NRIs also enjoy exemptions on their capital gain income from the sale of the property. Following are the tax exemptions available to an NRI:
As per the income tax act, when a payment is made to NRIs, TDS must be deducted at the applicable rate depending on the nature of income. So, when an NRI sells a property following TDS is applicable in case of sale of property by NRI, if the capital gain is long-term, the buyer must deduct a TDS of 20% on the sale price of the property. Similarly, in case of short-term capital gains, TDS at the rate of 30% is deducted. The TDS chargeable to NRIs is higher than that chargeable to resident Indians. In case the income amount exceeds the prescribed limit (50/100 lakhs) surcharge also needs to be collected. The deducted taxes are to be paid to the Income Tax Department along with a duly filled Challan 26QB.
The bank with which the NRI deals will allow for repatriation of income from immovable property subject to a few conditions.
In the case of property owned by NRI in India, the tax implications and exemption are similar to those of a resident Indian. However, the NRI must produce all the documents for claiming deductions. An NRI must make an informed decision to avail of all the benefits available to NRIs.
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