Tax implications

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Investments in real estate in India requires an NRI to pay a registration fee and stamp duty at the time of purchase. He/she also has access to all the benefits that an Indian resident can avail on the interest paid for the home loan.

The predetermined norms, by the RBI, for home loans for non-residents looking to buy property are :

1. The financial institution can finance upto 80 per cent amount, with the rest of the amount supplied by the NRI.

2. The amount of money for down payment can be paid from the place of residence by normal banking channels, i.e. NRO/NRE account in India.

3. The repayment of the NRI’s principal amount as well as interest part has to be done from that similar channel only.

Standard reduction is applicable as per the standard slab, because the amount of income received from such action comes under the head of income from property. Thus, in such a case, where the NRI lives in a country where worldwide income is taxable, he/she will have to pay the applicable tax, unless the country has a Double Tax Avoidance Agreement with India.

The amount that is paid for interest of home loan is deductible from the non residents taxable income without any upper limit and thus proves to advantageous for the NRI.The NRI is legally responsible for the payment of capital gains tax as prescribed under the Income Tax Act, in case he sells off the property. Once the relevant income tax and capital gains at the time of sale proceedings are deducted from the account, one can repatriate the funds from the NRE account to the foreign account

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