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NRI Corner.

Real estate has always been an ideal and preferred investment option for Non-Resident Indians. And today, while the real estate prices in the world are dwindling, the real estate investment market in Bangalore is promising. To make the best of this opportunity the Non-Resident Indians should strongly consider making investment in Bangalore real estate. Real estate Investment by Non-Resident Indians today will bring higher appreciation in the years to come and that the investment made today will not be of any regret.

Before making any investment in real estate the Non-Resident Indian should very carefully prepare the basic objective or the purpose of making investment in real estate sector in Bangalore. The strategy will be different in case the investment in real estate is made for acquiring a residential property for self use. Likewise, the strategy will be still quite different if a Non-Resident Indian who is interested to invest in real estate just with the sole objective of receiving a regular flow of money by way of rental income.

Reversely the strategy for investment will be different in a situation where the Non-Resident Indian would like to buy real estate with the objective only of making money at the time of selling the property.

Hence, the first strategy with reference to investment by a Non-Resident Indian in real estate would be to shortlist the specific purpose or objective of making investment in real estate.

SELF USE

The Non-Resident Indian can make investment in a residential property for his own use. This property can be in the form of ownership flat or it could be in the form of buying a piece of land and constructing a house thereon. In both the situations it is of advantage for a Non-Resident Indian to make investment in a residential self occupied property by taking a loan.

The Non-Resident Indian would be very happy to note that if he takes loan for a self occupied house property, then he would enjoy a deduction from his Indian income in respect of interest paid on loan taken for such self occupied residential property. This loan can be taken either from the bank or financial institution so also the loan can be taken from any member of the family or friend or relative.

Similarly, as per the provisions contained in section 80C of the Income-tax Act, 1961 the Non-Resident Indian just like a Resident Indian would also enjoy deduction in respect of repayment of the housing loan for self occupied property.

RENTAL INCOME

The Non-Resident Indian can make investment in a residential property or in a commercial property with the objective of receiving a regular flow of rental income. The provisions of taxing rental income are simple, easy and investor friendly.

There is a big deduction available from rental income which is instrumental in cutting down the tax payment by a Non-Resident Indian on rental income.

Another important feature of taxation relates to complete deduction without any upper limit of the interest paid by the Non-Resident Indian for purchase of property which is given on rent. Thus, the entire interest payment for purchase of property which is given on rent is allowed as a deduction from the rental income. This is a great big advantage. Hence, it is worthwhile for the Non-Resident Indian to make investment in real estate specially the real estate acquired for receiving a fixed flow of rental income by taking a loan for such purchase.

THE TAX SAVER FORMULA

If the objective of a Non-Resident Indian is to make investment in real estate, with the sole objective of making money by selling such real estate, then for such Non-Resident Indians, it is strongly recommended that they should not sell their real estate at least within three years of purchase of the real estate.

To make the things very simple and clear it may be noted that whenever the property whether commercial or residential is sold by a Non-Resident Indian, then just like Resident Individual income-tax is payable on the Capital Gains amount received by selling the real estate. In case the property is sold for holding it for a minimum period of three years, in that situation the Capital Gains arising to the Non-Resident Individual is known as Long-Term Capital Gain. While reversely if the real estate is sold within a period of less than three years from the date of purchase, in that situation the profit arising on such transaction is treated as Short-Term Capital Gain. Under the Income-tax Law Short-Term Capital Gain is liable to tax and is to be added with other income of the Non-Resident Indian.

Reversely, in case the property is sold after holding it for three years, it becomes Long-Term Capital Gain for which innumerable tax advantages can be achieved by a Non-Resident Indian.

Thus, it makes a sense for all Non-Resident Indians to purchase real estate in India and sell the same only after holding it for three long years. This small activity if implemented by the NRI in reality will help them to save a substantial amount of income-tax on their Long-Term Capital Gain.

Reverse Mortgage Benefit for NRIs

The concept of Reverse Mortgage which is very popular and prevalent in USA and other countries of the world is also now popular in India. Now the senior citizens in particular can take advantage of Reverse Mortgage in respect of the real estate owned by them in India. The amount taken from the bank consequent to Reverse Mortgage is not added as income of the Non-Resident Indian. Thus, in old age this concept of Reverse Mortgage really happens to be a wonderful tool of enjoying your property in India on the one hand and on the other hand taking money from the bank consequent to Reverse Mortgage of the property.
Finally, the Non-Resident Indian while making investment in real estate in India would find their decision of making investment in real estate in India a really rewarding proposition because now a days hassles are less, tensions are less, tax provisions are simple, innovative vistas are available to save your tax and finally repatriation becomes easy and simple.

Repatriation of Rental Income and Sale Proceeds of Property

Within the provisions of the Foreign Exchange Management Act, it is possible for a Non-Resident Indian to repatriate the rental income received from investment in real estate in India.