NRI Property Renting  2021

The real estate market in India observes a lot of investments from NRIs every year. The investment here is to have a home away from home or just for investment purposes for earning some extra moolah in terms of rental income.

As the real estate sector is back picking up steam, in the view of new policies and low-interest rates, there is a particular consumer segment showing a renewed interest in investing: NRIs. Many NRI’s are investing and locking up deals in the upcoming projects in the metropolitan city, Mumbai. As the real estate sector in Mumbai was quite affected due to the global pandemic last year, the sector is back and picking up where it left off.

The investors have started investing in the prime localities of Mumbai. As the primary investments have always come in from the people who have settled in the UAE, Singapore, the UK, and the US, for properties across segments: residential, commercial, or be it even warehousing.

So, as an NRI what can you do to your property? You can either keep it locked up and use it when you’re in town or rent it out to earn some extra income.

Let us look at some implications of renting out your house as an NRI

Taxation:

1) If you have a property in India, which is on rent then you have to pay the tax generated from the rental income, despite the fact in which country you stay.

2) NRIs don’t have to pay tax on the entire rental income, there are few deductions to consider. In order to calculate the deductions from your rental income follow these pointers:

You need to deduct 30 percent from the taxable value, considering the taxes to be paid to the municipal authority concerning the respective rented property in which locality.

Also, note that the interests that you have paid for the construction or repair of the property.

3) Depending on the NRIs residential status, some NRI’s might have to pay taxes in both countries for the rental income that they have earned. Countries like the Middle East are tax-free, so people living there need not worry. Whereas countries like the United States and India have double taxation Avoidance Agreement. But remember, the income you generate in India must be deposited in the Non-Resident Ordinary (NRO) account only.

4) If an NRI has taken a home loan to buy a property in India, he or she is eligible to avail tax deduction under 80c up to Rs 1.50 lakh. This can be deducted from India’s total income in which rental income also gets included.

Documentations:

Indian Passport or Overseas Citizen of India (OCI) Card

Pan Card

Power of Attorney Certificate

Housing loan:

The RBI has given general permission to banks and housing finance companies registered with the National Housing Bank to provide loans to NRIs for buying residential property anywhere in India. Sanctioned in Indian currency, the loan has to be repaid using the same currency. However, according to the regulations, the loan amount cannot be credited directly to the bank account of an NRI and has to be disbursed to either the seller’s or the developer’s account. The loan can be repaid using funds in an NRI’s NRO/NRE account or FCNR deposits.

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