How To Buy A Property From An NRI
Buy A Property From An NRI : Buying a property in India from a Non-resident Indian (NRI) is more difficult than buying from an Indian resident. Because of the legal complexities involved in the process, this is the case. If you don’t want the authorities to come knocking after you buy a house, keep these tips in mind before you sign the papers.
Property acquisition can be a complicated process due to the numerous rules and regulations that must be followed. The requirements for purchasing a property from a developer differ from those for purchasing a home on the secondary market. Furthermore, in the resale market, purchasing a home from an Indian resident may be slightly less complicated than purchasing from a non-resident Indian (NRI). As a result, if you are planning to buy a home owned by an NRI, here are a few pointers to help you navigate the transaction smoothly:
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Who is responsible for paying the tax?
“The process of buying a home from an NRI is nearly identical; the difference is in taxation.” According to Section 195 of the Income Tax Act (ITA), the tax on the sale and purchase of immovable property from an NRI is 20% versus 1% when buying from an Indian citizen,” Furthermore, if the property is worth less than Rs 50 lakh and the seller resides in India, no tax is levied. TDS is levied at a rate of 20.80 percent for properties costing less than Rs 50 lakh, 22.88 percent for properties costing between Rs 50 lakh and Rs 1 Crore, and 23.92 percent for properties costing more than Rs 1 Crore in the case of an NRI.
NRIs frequently insist on calculating the tax based on the property’s value. Section 195, on the other hand, states that the TDS is based on the property’s sale price. If the NRI is a tax defaulter, the department will hold the new owner liable for the past tax dues plus 12 percent interest. The new owner could be penalised as well.
To avoid legal complications later, one should have the tax calculated by a registered tax official and pay the dues on their own to avoid any discrepancy in figures.
Buy A Property From An NRI: Purchase a TAN.
Whether you are purchasing a property from a resident or a non-resident Indian. You must have a Tax Deduction and Collection Account Number (TAN), as stated in Section 195 of the ITA. If you initiate the transaction and deduct TDS without a TAN. The Income Tax department may levy a hefty penalty on you. It should also be noted that if the property is purchased jointly, all co-buyers must have TAN.
Make payment in NRO/NRE/FCNR accounts
NRIs frequently ask native residents to make payments in their Indian accounts to avoid legal complications. Claiming that it will be easier for them. However, it is best to withdraw from such negotiations and request their Non-Resident External (NRE). Non-Resident Ordinary (NRO), or Foreign Currency Non-Repatriable (FCNR) account information. This will protect you from any legal consequences. The provided account details must also be mentioned in the sale deed.
Buy A Property From An NRI: Other noteworthy points include:
- The seller must have a Permanent Account Number in order to complete a property transaction (PAN). So, before starting a transaction, always request the seller’s PAN.
- Always request that the seller be present in India to complete the transaction. If the seller is unable to be present at the time of deal closure in front of the registrar. See if they have granted someone Power of Attorney (PoA) to carry out the transaction.
- Determine whether the property has a single or multiple owners. If it is owned jointly, the payment is made in proportion to their share of the property. Paying a single owner may lead to future litigation.
Penalties for failure to comply with Section 195
If a buyer fails to deduct TDS as require by Section 195, he is declared an assessee in default and is booked under Section 201 of the Income Tax Act. Here is a list of some of the most common penalties:
- A penalty of Rs 10,000 is levied if a buyer fails to provide his/her TAN or PAN.
- A 100 percent penalty will be impose if a buyer fails to deduct TDS in part or in full.
- A Rs 100 per day penalty is imposed if the TDS return or Certification of Deduction is not filed within 15 days of the transaction.
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