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Property Taxation/ Investment Guidelines and Norms

The government has been reviewing its policies to attract investment by NRIs in real estate. In its mid-term review of the economic policy for 2006-07, the RBI

  • Removed the lock-in period for the sale proceeds of property credited to NRO accounts, with a cap of USD1 million.
  • Permitted the full repatriation of income from the rented porperty after payment of tax.
  • Extended tax exemptions from wealth tax on commercial and reasidential property for at least 300 days in a calendar year..

The Government of India has entered into tax treaties or Double Tax Avoidance Agreements (DTAA) with several countries where Indians reside in large numbers. The treaties aim to protect taxpayers from paying double taxes in India and the adopted country. The treaties have provided for tax to be deducted at source out of payments to NRIs and PIOs to facilitate the process of assessment of taxes due by them.

The Income tax Act, 1961 (ITA) defines the taxability of an individual in India, which is dependent on his residential status.

As per the ITA, the different residential status can be -

Resident - An individual who stays in India in a year ending March 31 for at least 182 days, or an individual who stays in India in a financial year ending March 31 for at least 60 days in that year, and a total of 365 days in the preceding 4 years.

The period of 60 days is extended to 182 days for

  • Indian citizens who leave India for employment outside India,
  • Indian citizens who are crew members of an Indian ship
  • Indian citizens or a Person of Indian Origin who visits India in any year
Ordinarily Resident (ROR) - an individual who is not a RNOR or an individual who is resident and ordinarily Indian, is taxed on his income received from India or deemed to receive in India in the relevant financial year.

For individuals in the Resident and Ordinarily Resident category, global income is taxable in India.

Resident but Not Ordinarily Resident (RNOR) - an individual who does not reside in India in 9 out of 10 years before the previous year, or a person residing in India for 729 days or less during the previous 7 years before the previous year.

An RNOR is taxed in India on the income which accrues or arises in India. No tax liability accrues in respect of any income, which may accrue or arise out of India.

Non-Resident
An individual who does not fall into the above resident categories is a Non Resident

A Non-Resident is taxed in India on the income received or deemed to be received in India or accrues or arises or deemed to accrue or arise in India, in the relevant financial year.

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