If you are planning to buy a flat from an NRI, you must understand the NRI Property Tax implications in India and possible deductions on such properties while purchasing it. In case you purchase property from Non-Resident, as per the section 195, 20% of TDS deductions is applicable.
Key Points of Tax implications for NRI buying property in India
- Know the status of seller whether he/she is a tax resident or not, To do so check out his/her passport details or I-T returns to determine stayed numbers of days in India during that period of owning the property asset.
- If the seller has given property to power of attorney(POA), he/she is Non-Resident Indian.
- An individual must have TAN(Tax Collection and Deduction Account Number) otherwise there would be a penalty on buyer if he/she apply for deductions without it.
- Taxability differ from person to person so check out people status i.e resident, non-resident, resident not ordinary resident(RNOR). NRI Taxation policies will be different from that of resident tax.
- In other words a resident will pay the tax on both income either it’s earned from India or abroad.
- Non-resident or RNOR Indian will exempt from such tax in India on an income earned in abroad country.
- If case of double taxation, they can follow Double Taxation Avoidance Agreement scheme between two countries if same income is taxed in both countries.