Purchase of property from foreign remmitance and tax on lease rental for NRI
This query is : Resolved
07 December 2025
Husband and wife both working outside Indian want to purchase a property in manali from foreign remittance and then to lease it to a resident local Indian for earning rental income. What are tax implications?
07 December 2025
Property Purchase Rules for NRIs
• Eligibility: NRIs (Non-Resident Indians) and OCIs can freely purchase residential or commercial property in India. They cannot buy agricultural land, plantation property, or farmhouses.
• Payment: Must be made through inward remittance via normal banking channels or from funds in an NRE/NRO/FCNR account.
• Ownership: Both husband and wife can jointly own the property. Title transfer is straightforward under FEMA rules.
• Eligibility: NRIs (Non-Resident Indians) and OCIs can freely purchase residential or commercial property in India. They cannot buy agricultural land, plantation property, or farmhouses.
• Payment: Must be made through inward remittance via normal banking channels or from funds in an NRE/NRO/FCNR account.
• Ownership: Both husband and wife can jointly own the property. Title transfer is straightforward under FEMA rules.
07 December 2025
Taxation of Rental Income
• Taxable in India: Rental income from property in India is always taxable in India, regardless of the NRI’s country of residence.
• TDS Deduction: The tenant (resident Indian) must deduct TDS at 30% (plus surcharge and cess) before paying rent to the NRI landlord.
• Income Tax Return: NRIs must file an Indian income tax return to claim deductions (e.g., municipal taxes, standard deduction of 30%, and home loan interest if applicable).
• Double Taxation Avoidance Agreement (DTAA): If the NRI resides in a country with DTAA with India, they can claim credit for taxes paid in India against their tax liability abroad.
• Taxable in India: Rental income from property in India is always taxable in India, regardless of the NRI’s country of residence.
• TDS Deduction: The tenant (resident Indian) must deduct TDS at 30% (plus surcharge and cess) before paying rent to the NRI landlord.
• Income Tax Return: NRIs must file an Indian income tax return to claim deductions (e.g., municipal taxes, standard deduction of 30%, and home loan interest if applicable).
• Double Taxation Avoidance Agreement (DTAA): If the NRI resides in a country with DTAA with India, they can claim credit for taxes paid in India against their tax liability abroad.
07 December 2025
Repatriation of Rental Income
• Rental income can be repatriated abroad through an NRO account, after applicable taxes are paid.
• RBI permits repatriation of up to USD 1 million per financial year from NRO accounts, subject to submission of necessary documents (CA certificate, Form 15CA/CB, etc.).
• Rental income can be repatriated abroad through an NRO account, after applicable taxes are paid.
• RBI permits repatriation of up to USD 1 million per financial year from NRO accounts, subject to submission of necessary documents (CA certificate, Form 15CA/CB, etc.).
07 December 2025
Capital Gains on Sale (Future Consideration)
• If the property is later sold, capital gains tax applies:
• Short-term (held < 24 months): Taxed at slab rates.
• Long-term (held ≥ 24 months): Taxed at 12.50% without indexation benefits.
• Buyer must deduct TDS at 20% on sale consideration for long-term capital gains.
• If the property is later sold, capital gains tax applies:
• Short-term (held < 24 months): Taxed at slab rates.
• Long-term (held ≥ 24 months): Taxed at 12.50% without indexation benefits.
• Buyer must deduct TDS at 20% on sale consideration for long-term capital gains.
07 December 2025
Capital Gains on Sale (Future Consideration)
• If the property is later sold, capital gains tax applies:
• Short-term (held < 24 months): Taxed at slab rates.
• Long-term (held ≥ 24 months): Taxed at 12.50% without indexation benefits.
• Buyer must deduct TDS at 12.50% on sale consideration for long-term capital gains.
• If the property is later sold, capital gains tax applies:
• Short-term (held < 24 months): Taxed at slab rates.
• Long-term (held ≥ 24 months): Taxed at 12.50% without indexation benefits.
• Buyer must deduct TDS at 12.50% on sale consideration for long-term capital gains.
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