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May 2018

Buying of immovable property and agricultural land by NRIs

Buying of immovable property and agricultural land by NRIs

While the immovable property usually refers to the property that is fixed to earth like a house; an agricultural land generally refers to the land which is devoted to the agriculture and the systematic and controlled rearing of livestock with the production of crops in order to produce the food for humans. Hence, it is synonymous with farmland or cropland.
Which properties can the non-resident Indians Purchase?
Non-resident Indians can own the residential and commercial properties in India and there are no restrictions on a number of immovable properties that he can actually purchase. All transactions in relation to the immovable property have to be done in Indian rupees and through normal banking channels. The funds regulating to the transaction have to be maintained in the non-resident account under the foreign exchange management act and RBI regulations. One, however, can’t buy any farmhouse or agricultural land or plantation land and all these properties can only be inherited. In order to buy any such properties, he has to take permission in advance from Reserve Bank of India. Such proposals would then be considered by the Reserve Bank of India in consultation with Government of India.
Transfer of Property by the non-resident Indian
Non-resident Indian transfer immovable properties other than the agricultural land to-
• Any person of Indian origin, residing outside
• Any person residing in India
• Any person who is an Indian citizen, but lives outside the territory
Any farmhouse or the plantation property or the agricultural land that has acquired in the inheritance can only be transferred to the Indian citizens who are permanently living in India.
Tax Implications
On buying the immovable property by the non-resident India, he would actually be entitled to all the tax benefits that the Indian residents would be entitled to. The non-resident Indians have to pay the Tax Deducted at Source at a rate of 1% if the property being bought is worth over Rs 50 lakh. In case of the property being vacant, the wealth tax would be exempted. But, this rule is applicable to the first property. For subsequent vacant properties, the tax at the complete rate of 1% the value in excess of Rs 30 lakh will have to be paid. While selling the property, capital gains tax as prescribed under the Income Tax Act will have to be paid. The long-term capital gains advantages can be received if the property is held for more than 36 months. Capital gains may be taxable in the country the Non-resident Indian lives if they don’t have the Double Taxation Avoidance Agreement with India.


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