Property

NRI Property Investment: Tax Implications and Compliance

January 5, 2025

10 min read

Key Takeaway

NRIs can invest in Indian real estate with specific restrictions and must navigate complex tax implications including TDS, capital gains tax, and repatriation rules for optimal returns.

Property Investment Rules for NRIs

✅ Allowed Investments

• Residential properties
• Commercial properties
• Agricultural land (inherited only)
• Plantation property (inherited only)

❌ Restricted Investments

• Agricultural land (fresh purchase)
• Plantation property (fresh purchase)
• Farmhouse
• Properties in restricted areas

Tax Implications for NRI Property Owners

1. Tax Deducted at Source (TDS)

On Property Sale

• TDS: 20% + surcharge + cess
• On the gross sale value
• Buyer is responsible for TDS deduction

On Rental Income

• TDS: 30% + surcharge + cess
• On rental income above ₹2.4 lakh/year
• Tenant deducts and pays to government

2. Capital Gains Tax

Short-Term Capital Gains (STCG)

Holding Period:

≤ 2 years

Tax Rate:

Added to income, taxed as per slab

Indexation:

Not available

Long-Term Capital Gains (LTCG)

Holding Period:

> 2 years

Tax Rate:

20% + surcharge + cess

Indexation:

Available

3. Rental Income Taxation

Rental income from Indian property is taxable in India for NRIs. You can claim deductions for:

Municipal taxes paid during the year
30% standard deduction for repairs and maintenance
Interest on home loan (without any ceiling)
Other expenses directly related to the property

Repatriation of Property Sale Proceeds

Repatriation Limits

Residential Property

• Up to 2 properties can be sold
• Proceeds fully repatriable
• Subject to tax clearance

Commercial Property

• No limit on number of properties
• Full repatriation allowed
• Compliance with FEMA required

Documentation Required

For Purchase

• Copy of passport with valid visa
• Overseas address proof
• PAN card
• NRI bank account details
• Source of funds documentation

For Sale/Repatriation

• Tax clearance certificate (TCC)
• CA certificate for repatriation
• Property valuation report
• Bank certificates
• FIRC (Foreign Inward Remittance Certificate)

Tax Planning Strategies

1

Hold Property for Long Term

Hold for more than 2 years to avail LTCG benefits with indexation.

2

Utilize Section 54 Benefits

Invest LTCG in another residential property to claim exemption under Section 54.

3

Plan Joint Ownership

Consider joint ownership with resident relatives to optimize tax implications.

⚠️ Important Compliance Points

• File ITR even if no tax liability exists
• Obtain TCC before repatriation
• Maintain proper documentation for all transactions
• Report property ownership in foreign country tax returns
• Consider DTAA benefits for tax optimization