What is the procedure for domestic buyers to avail home
Here are the legal documents required to obtain housing loans:
(a) Income Tax Returns (b) Salary Slips (c)
Residence Proof (if you have any) (d) Proof of
Identification (e) Auditors Report
loan will be sanctioned after the selection of property and
submission of the required legal documents. The process might take
some time as each document needs to be verified for the safety of
the applicant. The 230 A Clearance of the seller and / or 37I
clearance from the appropriate income tax authorities (if
applicable) is also needed. Once the above has been submitted and
verified, the registration of the conveyance deed and investment of
the applicant's own contribution and the loan amount will be
disbursed by the bank. The disbursement will be in favor of the
Under the general permission granted by RBI, the following
categories can freely purchase immovable property in India:
(a) Non-Resident Indian (NRI)- that is a citizen of India
residing outside India
(b) Person of Indian
Origin (PIO)- that is an individual (not being a citizen of
Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran
or Nepal or Bhutan), who
(i) at any time, held
Indian passport or
(ii) who or either of whose
father or whose grandfather was a citizen of India by virtue of the
Constitution of India or the Citizenship Act, 1955 (57 of 1955).
The general permission, however, covers only purchase of
residential and commercial property and not for purchase of
agricultural land/plantation property/farm house in India.
(c) OCI can purchase immovable property in India except
agricultural land/plantation property/farmhouse.
What documents are required by NRIs, PIOs and OCIs for
- Pan card (Permanent Account Number)
card (In case of OCI/PIO)
- Passport (In case
- Passport size photographs
- Address proof
What are the Tax compliances for acquiring property for
NRIs, PIOs and OCIs?
Mere acquisition of property does not attract income tax in the
hands of buyer. However, any income accruing to the seller of the
property is subject to income tax as the income constitute capital
gains. In this regard, buyer of the property has to deduct Tax
Deducted at Source (TDS) at the rate of 1% on total consideration
(as and when payments are made). Such tax has to be deposited to
the government by within a due date along with the form in a
prescribed manner. Further details on procedure of payment of tax
and filing form is mentioned at
What is the Tax treatment for income generated from
property selling or renting for NRI/ PIO/OCI?
The mere acquisition of property does not attract income
tax. However, any income accruing from the ownership of it, in the
form of rent (if it is let out)/annual value of the house (if is
not let out and it is not the only residential property owned by
that person in India) and/or capital gains (short term or long
term) arising on the sale of this house or part thereof is taxable
in the hands of the owner.
Do NRI/PIO/OCI have to file return in India for their
property rental income and Capital Gains Tax?
The taxes have to be paid if a person is selling this
property situated in India. Rental income earned is taxable in
India, and they will have to obtain a PAN and file return of income
if they have rented this property. On sale of the property, the
profit on sale shall be subject to capital gains. If they have held
the property for less than or equal to 3 years after taking actual
possession then the gains would be short term capital gains, which
are to be included in their total income as tax as per the normal
slab rates shall be payable and if the property has been held for
more then 3 years then the resultant gain would be long term
capital gains subject to 20% tax plus applicable cess.
How does the Double Taxation Avoidance Agreement work in
the context of tax on income and Capital Gains tax paid in India by
India has DTAA’s with several countries which give a
favourable tax treatment in respect of certain heads of income.
However, in case of sale of immovable property, the DTAA with most
countries provide that the capital gains will be taxed in the
country where the immovable property is situated. Hence, the
non-resident will be subject to tax in India on the capital gains
which arise on the sale of immovable property in India. Letting of
immovable property in India would be taxed in India under most tax
treaties in view of the fact that the property is situated in
Does Capital Gains Tax (CGT) apply to NRI/PIO/OCI?
Yes. Long-term and short-term capital gains are taxable in
the hands of non-residents.
How is Rate of CGT computed?
Type of asset: Assets like house property, land and building,
jewellery, development rights etc.
Rate of tax
deduction at source (TDS)
Long term: 20.6%
Short term: 30.9%
Exemption available (only for
long term capital gains)
The long term capital
gains arising on sale of a residential house can be invested in
buying/ constructing another residential house, within the
prescribed time. The exemption is restricted to the amount of
capital gains or amount invested in new residential house,
whichever is lower.
If the amount of capital
gains is invested in bonds of National Highways Authority of India
(NHAI) or Rural Electrification Corporation, then the entire
capital gains is exempted, else the proportionate gain is exempted.
As per the financial budget 2007-08, a cap of Rs. 50 lakhs has been
imposed on investment that can be made in capital tax saving bonds.
Who should file tax returns?
If you are an NRI/OCI/PIO, you would have to file your income tax
returns if you fulfill either of these conditions:
(a) Your taxable income in India during the year was above the
basic exemption limit of 1.6 lakh OR
have earned short-term or long-term capital gains from sale of any
investments or assets, even if the gains are less than the basic
Note: The enhanced exemption
limit for senior citizens and women is applicable only to residents
and not to non-residents.
Are there any exceptions?
Yes, there are two exceptions:
(a) If your
taxable income consisted only of investment income (interest)
and/or capital gains income and if tax has been deducted at source
from such income, you do not have to file your tax returns.
(b) If you earned long term capital gains from the sale
of equity shares or equity mutual funds, you do not have to pay any
tax and therefore you do not have to include that in your tax
Tip: You may also file a tax return if
you have to claim a refund. This may happen where the tax deducted
at source is more than the actual tax liability. Suppose your
taxable income for the year was below 1.6 lakh but the bank
deducted tax at source on your interest amount, you can claim a
refund by filing your tax return.
instance is when you have a capital loss that can be set-off
against capital gains. Tax may have been deducted at source on the
capital gains, but you can set-off (or carry forward) capital loss
against the gain and lower your actual tax liability. In such
cases, you would need to file a tax return.
What’s the best way to file tax returns?
Traditionally, you could file your return either by giving a power
of attorney to someone in India or by sending your form and
documents to a tax expert in India who would then file returns on
But nowadays, the easiest option
for NRIs to file their Indian tax returns is by using the online
platform. There are several options to file online.
What are the rules governing the repatriation of the
proceeds of sale of immovable properties by NRI/PIO as prescribed
by the Reserve Bank of India?
(a) If the property was acquired out of foreign exchange sources
i.e. remitted through normal banking channels/by debit to
NRE/FCNR(B) account, the amount to be repatriated should not exceed
the amount paid for the property:
(i) In foreign
exchange received through normal banking channel or
(ii) By debit to NRE account (foreign currency equivalent, as on
the date of payment) or debit to FCNR(B) account.
Repatriation of sale proceeds of residential property purchased by
NRI’s/PIO’s out of foreign exchange is restricted to not more than
two such properties. Capital gains, if any, may be credited to the
NRO account from where the NRI’s/PIO’s may repatriate an account up
to USD one million, per financial year, as discussed below.
(b) If the property was acquired out of Rupee sources, NRI/PIO may
remit an amount up to USD one million, per financial year, out of
the balances held in the NRO account (inclusive of sale proceeds of
assets acquired by way of inheritance or settlement), for all the
bonafide purposes to the satisfaction of the Authorized Dealer bank
and subject to tax compliance. The NRI/PIO may use this facility to
remit capital gains, where the acquisition of the subject property
was made by funds sourced by remittance through normal banking
channels/by debit to NRE/FCNR(B) account
Is the rental income from property repatriable and what are
the RBI rules?
The rental income, being a current account transaction, is
repatriable, subject to the appropriate deduction of tax and the
certification thereof by a Chartered Accountant in practice.
Repatriation of sale proceeds is subject to certain conditions. The
amount of repatriation cannot exceed the amount paid for
acquisition of the immovable property in foreign exchange.
Are NRI/PIO/OCI eligible for Housing loans to buy property
from any Indian Bank?
An authorised dealer or a housing finance institution in India
approved by the National Housing Bank may provide housing loan to a
non-resident Indian or a person of Indian origin residing outside
India. for acquisition of a residential accommodation in India,
subject to the following conditions, namely:
(a) the quantum of loans, margin money and the period of
repayment shall be at par with those applicable to housing finance
provided to a person residing in India.
(b) the loan amount shall not be credited to Non-resident
External (NRE)/Foreign Currency Non-resident (FCNR)/Non-resident
non-repatriable (NRNR) account of the borrower.
(c) the loan shall be fully secured by equitable mortgage
by deposit of title deal of the property proposed to be acquired,
and if necessary, also be lien on the borrower’s other assets in
(d) the instalment of loan, interest and other charges,
if any, shall be paid by the borrower by remittances from outside
India through normal banking channels or out of funds in his
Non-resident External (NRE)/Foreign Currency Non-resident
(FCNR)/Non-resident Non-repatriable (NRNR)/Non-resident Ordinary
(NRO)/non-resident Special Rupee (NRSR) account in India, or out of
rental income derived from renting out the property acquired by
utilisation of the loan or by any relative of the borrower in India
by crediting the borrower’s loan account through the bank account
of such relative (The word ‘relative’ means ‘relative’ as defined
in section 6 of the Companies Act, 1956.)
(e) the rate of interest on the loan shall conform to the
directives issued by the Reserve Bank of India or, as the case may
be, the National Housing Bank.