There are several NRI’s who own Ancestral properties in India or have purchased real estate in India from own funds. With the govt allowing the automatic rule for Investment in India, approval from the Reserve Bank is not required anymore as the NRI’s are now not required to go to the Foreign Investment Paper Board for approval for NRI Investment in India.
- Recommended Read: Rules for NRI Investment in India
These NRI’s can also sell property to other NRI’s or to Resident Indians. However, there are some extra points to be kept in mind while purchasing property from NRI. These points have been mentioned below and the buyer should ensure that he complies with all the below mentioned points.
Purchase of Property by Resident Indian from NRI
The procedure for purchase of property from NRI is the same as the procedure for the purchase of property from a Resident Indian. Once you have finalised on the property that is to be purchased, you are required to get it registered with the Municipal Authorities and pay the Registration Charges for the same.
However, apart from the normal things to checked, some extra care should be taken when the property is being purchased from a NRI. Here is a small checklist of the additional things to be kept before purchasing property from NRI.
- PAN Card of the NRI
Some NRI’s have PAN Cards whereas some of them don’t have PAN Cards. So at the time of entering into the transaction – it is important to check whether the NRI has PAN Card No. or not. In case the NRI does not have a PAN Card No., he would be required to apply for the same as the PAN Card No. would be required at the time of Registration of Property for change in Ownership. (Recommended Read: How to apply for PAN Card No. online)
- TDS on Property
Although TDS is deducted on purchase of property from Resident Indian as well, but the norms for TDS Deduction for purchase of property from NRI are different from the norms for purchase of property from a Indian Resident. Section 195 is applicable for TDS Deduction on purchase of property from NRI. These norms have been mentioned in detail in this article – Section 195: TDS on purchase of property from NRI.
- TAN No. of the Buyer
After deducting the TDS on Property, the buyer is then required to deposit the same with the Govt. While depositing the TDS, the buyer is also required to quote his TAN No. If the buyer does not have a TAN No., he would be required to apply for a TAN No.
This requirement of TAN No. for deposit of TDS is not there if the property is being purchased from a Resident Indian but TAN No. is required if the property is being purchased from NRI. (Recommended Read: What is TAN No. and How to apply for TAN No. online)
- TDS Return and Form 16A
After the deposit of TDS, the buyer is also required to file TDS Return and then issue Form 16A to the seller of the property. The TDS Return is filed on a quarterly basis. (Recommended Read: Procedure for filing TDS Return)
- Option for Lower Deduction of TDS
The seller can apply for the income tax officer for lower deduction of TDS. Based on the certificate of lower deduction issued by the income tax officer, the buyer will deduct the TDS at a lower rate.
The following video explains the tax implications on purchase of property from NRI:-