NRIs Guide to Pay Low Tax after Property Investment

Many non-residents of India (NRIs) keep so many plans in stock for their retirement. It’s true that their heart beats for the country. That’s why most of them want to spend the rest years of their life after retirement in the native land.

Property management services for NRIs have been introduced more by the government. These allot them more opportunities for feeling ease while purchasing or renting out their property.  However, it is an unhidden fact that the real-estate sector is waiting for improvisations. Diminishing price value of Indian rupee against US dollar is the prime reason to concern before making such investment.   

The constitution of India states that Person of India Origin (PIO) and NRIs can invest their hard core money in immovable property. Before knowing more about their rights, let’s have a look at what immovable property is:

Immovable property: The property other than agriculture land/ plantation property/ farm house falls under immovable property. Such property is available for NRIs to purchase. It can be inherited by them also.

To keep some daunting legalities at bay, the migrants of India should be aware of various provisions made for them, especially the Income Tax Act, 1962 (ITA). Before investing their hard-earned money in property, they have to think about tax saving tricks which come under legal services for NRIs. An NRI should invest in the same as prescription:

1. Investment in long term capital asset: If you are looking for exemption of gains on transferring capital assets, the ITA offers it. Most of the migrants hold residential property along appurtenant. It is called long term capital asset if they keep it for 36 months or more. Capital gain is calculated by deducting the sale proceeds and acquisition cost, renovation cost and transfer cost. If you make deal of the long term asset in Indian currency, then you cannot take advantage of indexation.
2. Capital gains account scheme: The migrant should do property investment in capital gains account scheme in the bank. It will be useful for depositing the funds which are not utilized. If you file for tax return under prescribed conditions, the tax exemption will be yours. Otherwise, your income through capital asset will be counted as taxable in the year, if the conditions are infringed.
3. Tax Exemption on investment in India: If the asset belongs to India, then you have right to ask for exemption in tax. Following prescribed conditions, short term profits that you receive by transferring agriculture land as well as land acquisition for industrial undertaking are categorized for tax exemption.
4. Tax deduction at source: According to ITA, the NRI has to look if the tax is deducted by the buyer when credited income to his account at the time of payment. The rate of tax deduction is 20 percent (including surcharge and education tax). This deduction is applicable to taxable income of that migrant.
5. Tax Exemption Certificate for lower tax payment: The migrant should take advice from the tax officer to pay the lower tax rate. The tax exemption certificate is issued by the tax officer that enables him to pay lower tax. Or, that NRI can obtain certificate from any CA. This certificate should have tax rate to be deducted.