Both the NRIs and the property market are attracted to each other. Thus, many people face a situation where the real estate agent talks about a property of an NRI which is for sale. As a result, the buyers also get a bit involved in this kind of property but there are certain things to consider before buying a property from an NRI i.e. the Non-Resident India. So, don’t fall for a wrong deal as we here list the essential things every home buyer should know before purchasing a property from an NRI:
1. RBI’s Approval
Every Non-Resident Indian [NRI] has a right to sell off his/her property in India to an Indian. But, an approval from the Reserve Bank of India [RBI] to sell a property to the NRIs living in the countries likes Afghanistan, Bhutan, China, Nepal, Pakistan, and Sri Lanka is mandatory. RBI’s approval is also essential for selling agricultural land. Hence, the buyer must ask for the document related to the selling approval from RBI to the NRI seller before finalizing the deal.
2. Permanent Account Number [PAN]
The Permanent Account Number i.e. PAN is an important document to carry out a monetary transaction here in India. Thus, both the NRI seller and the Indian buyer should have PAN and the buyer must check for the Tax Deduction Number [TAN] of the seller. In case, the seller fails to produce any of these documents then the buyer is accountable for paying the amount calculated under these provisions. Remember that all including the number of buyers and sellers should have PAN and TAN documents. For example, if an NRI jointly own the property with his wife and the buyer wish to purchase property jointly with her husband then all these four people should have the Permanent Account Number and a Tax Deduction Number.
3. Look for Special Power of Attorney
Many a time, the NRI seller finds it difficult to visit India even for finalizing the property deal and send a local representative from his/her side to complete the selling procedure. In this case, ask the seller for a Special Power of Attorney which he/she issued to the representative. This is important because the actual PoA and Special PoA are different. Hence, the Special PoA is used to finalize a deal as it offers limited rights to the seller’s representative which work in the buyer’s favor.
4. TDS Deduction according to Property Value
The Tax Deducted at Source commonly known as the TDS depend upon the property value. For example, the TDS is charged at 20.80% for the property costing up to Rs. 50 Lakh. TDS is charged at 22.88% if the property costs between Rs. 50 lakh and 1 Crore and the same is charged at 23.92% on the property of more than Rs. 1 Crore. Ask the NRI seller to produce the Income-tax Certificate issued by the IT department for securing lower tax eligibility. The buyer also gets a deduction on the capital gains made by the NRI seller.
5. Issuance of Form 16A
The TDS for any property deal is required to be submitted with the Income-tax department within seven days from when the deal is finalized. The buyer is responsible to file TDS return and also for getting Form 16A issuance from the authorities.
6. Depositing Transaction Amount
Ask the NRI seller to share the bank account which is currently in use. Look for the seller’s accounts like the Non-Resident External [NRE] or a Non-Resident Ordinary [NRO] or the Foreign Currency Non-Repatriable [FCNR] account. Always avoid depositing transactional amount in the saving account of the NRI seller in India.
7. Make a Sale Agreement
Make sure to ask the NRI seller for a sale deed. This is the legal document which you must take from the NRI seller at the time of paying the complete transactional amount.