Guide to Real Estate Woos of NRI’s: Best Real Estate Attorney Advice in India

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Legal Advice & Solutions for NRI’s & their Estates & Properties in India-11: Best NRI Legal Services in India
What precautions should NRIs take before giving their estate or properties on rent in India?
Investment in real estate is one of the most popular and lucrative investment option for the investors mainly because of its ability to generate regular cash flows through rent and many other benefits that come along like tax benefits, consistent RoI (Return on Investment) and a secure investment option. These are the reasons as to why a lot of NRIs are purchasing properties in India and are putting these properties on rent so as to generate passive income. The important points that an NRI has to keep in mind while renting out his or her property are as follows:
1. NRI should have one of these accounts either NRE (Non-Resident Account) or NRO (Non-Resident Ordinary Account).
NRE account: a bank account opened in India in the name of an NRI, to park his foreign earnings.
NRO account: it is a bank account that NRIs use in order to manage their deposits or income earned in India which can be in the form of rent, dividend, pension, etc. Holding one of these accounts makes the whole rent amount transferring process convenient as the funds can be easily repatriated too, it’s not compulsory to hold these accounts, the rent proceeds can be directly remitted abroad, it just requires a certificate from a CA that all the taxes are duly paid.
2. The next thing that an NRI must make sure is that the rent payer holds a TAN number which is basically a number allocated to tax–deductors. The tax deduction happens at source by the payer of the rent hence an NRI must make sure that it is available with the rent payer and TDS of 30 percent is being deducted from the rent amount. The rent payer is bound to provide the NRI with TDS certificate. In case where the payer doesn’t deduct tax and the NRI also didn’t file his income tax return then the payer would be held responsible.
3. The next important aspect that an NRI must keep in mind while renting out his or her property is to make sure that the NRI is well aware about the Double taxation Avoidance Agreement that India has entered with various countries. These agreements are in place to sort out the taxation issues with regards to getting taxed firstly in the country where the property is situated and secondly the country in which the rent proceeds are being transferred. If you are an NRI, you are undoubtedly a tax resident of a different nation. Also, most nations tax their citizens based on their worldwide income. So, it is possible that tax will be withheld at source from income received in India, as is the case with rent, in accordance with the rules of the Indian Income Tax regulations. However, that income will also be subject to taxation in your own country. In these circumstances, we must look to the Double Taxation Avoidance Agreements that India has made with a number of other nations. For instance, the India-US DTAA stipulates that immovable property rent would be taxed in the nation where the property is located. NRIs who live in the US must therefore pay tax on their rental income in India. They would receive a credit for taxes paid in India even though they would still need to declare that income when filing their tax returns in the US.
The most important thing is to be prudent and be aware about the existing tax laws of the country in which the person resides or consulting an expert in that country is also a good option
4. According to the Indian Income Tax Act, if a person (resident or NRI) owns more than one house property, only one of them will be deemed as self-occupied and non-income generating property but the other if it’s not rented then it will be deemed to be given on rent and deemed rental income will be calculated for the same. This more than one house or property means for a resident of India having more than one property will lead to the other being deemed on rent but say an NRI is there and he owns a property in India and is settled in some other country having property there too then in that case still even though the NRI only holds a single property back in India but that property is also eligible to be deemed on rent.
In case of inherited properties, you become the property’s owner after you inherit the property. As a result, the property is subject to the same tax laws as if you had bought it. As a result, you would be required to pay tax on presumed income if you had inherited a property in India that wasn’t your only property.
5. Tax exemption is also possible. You are eligible for a TDS exemption if your total income in India, including rental income, is less than the basic exemption amount of Rs. 1.6 lakh. But the procedure can be challenging. A tax exemption certificate would need to be requested from the tax authorities, and it would then need to be given to the renter. The tax officer must be persuaded of your claim in order for him to grant the certificate at his discretion. Another option would be to file your taxes and request a refund of the TDS you paid. Nonetheless, under these circumstances, the rental income may be completely taxed in the nation in which you reside (based on the tax laws in that country.) As a result, even though your income is below India’s basic exemption threshold and you don’t pay taxes there, if you live there, this income will be added to your US income and taxed in accordance with US tax laws. Residents of India are required to pay taxes on both domestically and internationally generated income; Also, they must disclose any foreign-held assets. NRIs, however, are exempt from paying taxes on income earned outside of India and are not required to report any assets they own outside of India to Indian authorities. (Only income earned in India is subject to taxation for NRIs.
Authored By: Adv. Anant Sharma, Vikrant Rathore & Lehar Saini

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