Every year a number of NRI’s buy properties in India for the purpose of investment as well as end-use by their family members. But most of them are buying it for the purpose of investment to multiply their source of income. The NRIs who have rental properties in India must know these 5 points in order to be in compliance with the local laws.
- Is it mandatory to file income tax returns in India?
Yes, as an NRI you should know that in India it is very important to file income tax returns. But let me mention one thing that if your total income does not exceed Rs 2.40 lakh annually then it’s not mandatory.
In case you have paid extra taxes, then what was supposed to be, then you can claim for tax refunds by filing the ITR (Income Tax Return) and claim refunds.
- If you have Home loans, then here are some tax deductions?
Under section 80C of the Income Tax Act, NRIs who have opted for home loans in India are entitled for an income tax exemption of Rs 1.50 lakh annually and the same could be subtracted from of the total income generated from India. The home loan must be taken from the property purchased for end-use. All the lease income shall also incorporate in your total income.
- Are you going to pay these taxes in India or in the country where you live?
This is the thumb rule: that you need to pay taxes in the country from where you generate an income. Clearly, if someone is getting income from a property in India then the person is responsible to pay the taxes in India irrespective of where you live.
- How your tax will be calculated?
There are some important points you shouldn’t miss, as some tax exemptions are available for you. Consider the following deductions in the first place, for the purpose of determining tax liability on your rental income:
- If you have taken a home loan for the purpose of construction, repair or renovation, then you can factor-in the payment of interest towards the loan.
- All the taxes paid to the Municipal Authority with respect to the concerned property which has been rented out can also be accountable for.
- What about the double taxation?
For instance, many countries in the Middle East region govern tax-free regimes. Therefore the NRIs in these countries do not need to worry about taxation. But, on the other hand, some NRIs are likely to pay taxes on their leasing income from India as well as in India too. So, it depends on which country you live in.
US-based NRIs can enjoy benefits under the Double Taxation Avoidance Agreement signed between the US and India. Under this agreement, NRIs who are residing in the United States can claim exemptions as per the laws.