You must have read about selling and inheriting property from an NRI the Non-Resident of India. But, have you ever thought about the points that are required to be considered while purchasing a property in India by an NRI? Well, similar to selling and transferring property to a Non-Resident India, you must also know about the things to consider while buying a property from an NRI:
- Approval from RBI
The NRIs living in any part of the world can sell their property in India to an Indian but the NRIs seller from Afghanistan, Bhutan, China, Nepal, Pakistan, and Sri Lanka are required to have an approval from the Reserve Bank of India [RBI] to sell their property. The RBI approval is necessary even for selling of the agricultural land.
- Permanent Account Number [PAN]
The NRI seller must have a Permanent Account Number [PAN] and Tax Deduction Number [TAN]. These are the two important documents the seller should have because the tax deduction cannot take place in the absence of them. Also, the buyer is required to have both PAN and TAN because he/she is liable to pay both the above-mentioned amounts in case the seller doesn’t have these documents. Also, the number of sellers and the buyer/ seller and his/her spouse involved in the deal are required to have PAN and TAN.
- Ask for Special Power of Attorney
In case, the NRI seller is not able to visit India for completing the selling deal, then he/she can send a representative from India itself to carry out the transaction by giving a Power of Attorney [PoA] to that person. In this case, ask the seller to prove his/her representative with a Special PoA as this is in the best interest of the buyer with limited rights to the representative of the NRI seller.
- Deduct TDS as per Property Cost
The TDS amount deduction depends upon the property value. You can deduct TDS of 20.80% if the property cost less than Rs. 50 Lakh. In case the property values between Rs.50 lakh and 1 Crore then, TDS must be deducted at 22.88%. Similarly, the TDS deduction stands at 23.92% if the property cost more than 1 crore. The buyer deducts TDS on the capital gain made by the NRI seller. Hence, wait for the Income-tax certificate to be produced by the NRI seller for establishing lower tax liability and then go for the standard deduction.
- Issuance of Form 16A
The TDS amount is required to be submitted to the Income Tax Department within a week after the buying-selling process takes place. Thus, you are responsible for the filing of the TDS return and for the issuance of the Form16A to the NRI seller after depositing the TDS amount with the authorities.
- Transfer of Property Value
Remember that buying a property from an NRI is not easy and the authorities will run behind you in case of any suspicious transaction. So, ask the NRI seller to provide his/her Non-Resident External [NRE] or a Non-Resident Ordinary [NRO] or Foreign Currency Non-Repatriable [FCNR] account. Deposit the property buying amount only in the above-mentioned accounts and not in any saving account of the NRI seller in India.
- Ask for a Sale Agreement
Always ask for a sale agreement especially when more than one sellers are involved in the deal. This is important to avoid any legal issues after paying the entire amount.