Introduction

Investing in Indian real estate is a golden opportunity for Non-Resident Indians (NRIs) looking to grow their wealth through high-value properties, passive rental income, and long-term capital appreciation. However, one of the key challenges NRIs face is understanding the tax benefits, repatriation rules, and legal formalities when investing in India.

✅ Major Tax Benefits for NRIs Investing in Indian Real Estate

1. Rental Income Taxation: Save More on Rental Earnings

If you are an NRI and own a rental property in India, you are eligible to earn rental income that is taxable in India under the Income Tax Act. However, there are certain tax-saving benefits that you can leverage to maximise your net rental income.

👉 Standard Deduction: You are allowed a standard deduction of 30% on the rental income under Section 24 of the Income Tax Act.

👉 Loan Interest Deduction: If you have purchased the property through a home loan, you can also claim a deduction on the interest paid on the loan.

👉 Property Taxes: Property tax paid during the year is also deductible from the gross rental income.

💡 Example: If your rental income is INR 1,00,000/month, you can reduce 30% (i.e., ₹30,000) as a standard deduction. So, your taxable income becomes ₹70,000/month.

2. Capital Gains Tax: Maximise Your Profit Upon Selling the Property

When NRIs sell their property in India, they become liable to pay Capital Gains Tax. Here’s how it works:

👉 Long-Term Capital Gains (LTCG): If you hold the property for more than 24 months, your profit is taxed at 20% with indexation benefits. Indexation helps adjust the property’s purchase price according to inflation, thereby reducing your taxable gains.

👉 Short-Term Capital Gains (STCG): If you sell the property within 24 months, the profit will be added to your income and taxed according to your income tax slab.

💡 Example:

• Purchase Price (2020): ₹1 Crore

• Selling Price (2024): ₹1.5 Crore

• Indexed Cost: ₹1.2 Crore

• Capital Gain: ₹30 Lakh

• Tax Payable: ₹6 Lakh (20% on ₹30 Lakh)

This allows NRIs to significantly reduce their tax liability while maximizing capital gains.

3. Repatriation of Funds: Transfer Your Money Abroad Legally

One of the most commonly asked questions by NRIs is — “Can I transfer my money from property sale to my foreign bank account?”

✅ Yes, you can! As per the RBI (Reserve Bank of India) guidelines, NRIs are allowed to repatriate up to USD 1 million per financial year from property sale proceeds.

👉 Required Documents:

• Form 15CA and Form 15CB certified by a Chartered Accountant.

• Bank account proof.

• Sale deed and tax receipts.

💡 Pro Tip: Always consult a tax consultant to facilitate a smooth transfer of funds without legal complications.

4. Major Tax Exemptions for NRIs

The Indian government offers tax exemptions that can significantly reduce your tax liability.

✅ Section 54 (Capital Gains Exemption): If you reinvest the sale proceeds of your property into another residential property within 2 years or construct a house within 3 years, you can claim 100% tax exemption on capital gains.

✅ Section 80C (Home Loan Principal Repayment): You can claim a tax deduction of up to ₹1.5 Lakh per year under Section 80C for home loan principal repayment.

✅ Joint Ownership: If you co-own the property with your spouse, both can claim separate tax deductions.

✅ Legal Procedures for NRIs Investing in Real Estate

1. Power of Attorney (PoA): Streamline Your Transactions

As an NRI, you might not be physically present in India for property transactions. This is where Power of Attorney (PoA) helps.

• You can appoint a trusted person (friend, family, lawyer) to handle property transactions on your behalf.

• The PoA must be attested by the Indian Embassy or Consulate in your residing country.

2. RERA Approval: Always Verify the Project’s Legality

The Real Estate Regulatory Authority (RERA) ensures that builders and developers comply with legal regulations.

• Always ensure the property has a RERA registration number.

• Check for clear title deeds and building plan approvals.

3. PAN Card (Permanent Account Number): Mandatory for Transactions

As an NRI, you must have a PAN Card to:

• Purchase/Sell property.

• File Income Tax Returns (ITR).

• Avail Capital Gains Exemptions.

4. Bank Account (NRE/NRO): Fund Management

NRIs are required to route their real estate transactions through NRE (Non-Resident External) or NRO (Non-Resident Ordinary) bank accounts.

• NRE Account: Can be used for repatriating money back to your foreign account.

• NRO Account: Can be used to collect rent and manage domestic expenses.

✅ Final Thoughts

Investing in Indian real estate can be highly lucrative for NRIs if approached with the right knowledge and understanding of tax benefits, capital gains, and repatriation laws. It is always recommended to work with a reliable real estate advisory like PropGrow to handle all the paperwork, legal formalities, and investment planning.

👉 Ready to invest in India? Contact PropGrow today and secure your wealth through premium real estate investments.