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Legal Tips for Indian Residents before they Buy Property in India: NRI Legal Services

Best and Experienced Lawyers online in India > Legal Advice  > Legal Tips for Indian Residents before they Buy Property in India: NRI Legal Services

Legal Tips for Indian Residents before they Buy Property in India: NRI Legal Services

“Under the NRI legal services the real estate laws or the property related queries find a special place. There have been cases/events wherein the NRI has entered into a wrong transaction as he/she did not avail a proper online legal consultation from a reputed real estate attorney or lawyer handling property cases and thus leading to a financial loss. There have been numerous cases where the property gets struck in litigation or the possession is not delivered and the buyer has to suffer the losses. Further, for want of knowledge of the real estate laws of India or the property laws of India there always exists a chance of deficient paperwork and legal documentation.”

Indian Residents can purchase property from fellow resident or Non-Resident Indians (NRIs) too. But before they buy the property it is advisable to keep certain things in mind like statutory regulations, confirmation with FEMA, RERA and RBI Rules along with rightful transfer of ownership of property.

Legal Tips before Buying Property in India
The procedure of buying property from NRI and Indian resident is same, jut few things like tax implication and Power of Attorney (POA) should be given attention too. ‘
In case the Indian resident is buying property from NRI, below-mentioned things should be kept in mind or Indian resident should be aware about-
1. While buying the property from NRI, tax deducted at source (TDS) is applicable on the buyer which is provided under section 195 of the Income Tax Act, 1961. It put liability on buyer that whenever the buyer pays the NRI, he/she should deduct income tax at the rate prevalent in the market. It means that the buyer (Indian Resident) would have to deduct the TDS on amount of total sale consideration before paying the seller (NRI).
2. When the seller sale the property, he/she is liable to pay tax on capital gains from that property. There is 20 % tax implication on Long-term capital gain (LTCG) and short-term capital gains (STCG) are taxed as according to the individual ’s income slab rate. So, buyer should be very vigilant about these tax implications that if the seller has paid the tax on the property or not.
3. Buyer has to keep in mind Income Tax Refund also, it means if the TDS deducted is more than the tax on LTCG, the seller can file for income tax refund. Filing of income tax refund can ensure tax refund to seller but the seller will get the refund at the end of the financial year. To avoid this situation where TDS deducted is more than the tax on LTCG, the seller can opt for Certificate for lower deduction of tax provided under Section 197 of the Income Tax Act. It also took a long time.
4. The mistake buyer made is that they deduct TDS at the rate prescribed for buying of property from residents of India which is much lower than that prescribed for NRIs. It should be avoided by the buyers.
5. In case the NRI have appointed representative, then the buyer should make sure that what type of POA it is and if it’s executed legally or not.
6. The buyer needs to have Tax deduction and collection Account number (TAN), if buying property from NRI. In case the buyer doesn’t find to have one, there are consequences like penalty imposed by Income Tax department on Buyer.
7. There is penalty on collecting TDS and submitting it to the concerned authority.
So, before buying property from NRI, the buyer who is Indian resident should keep above mentioned things in mind and shall be very vigilant during the whole process of transaction.

Legal Attorney’s Advice for Indian Residents before Buying Property in India
Now, if a buyer is purchasing the property from Indian resident, there are some common things to be kept in mind-
1. Regulatory Law- Buyer should be aware about the laws governing Indian real estate sector i.e., RERA Act and regulatory authorities set up under this Act.
2. Check for encumbrances- The buyer should make sure that the property is not disputed, no monetary debts are there on that property or any outstanding mortgages and taxes are paid on that property. In short, anything regarding the property like monetary debts, legal dispute that could become obstacle in transfer of or after the transfer of the concerned property should be eliminated.
3. RERA approved Projects- It is advisable to go for RERA approved projects, because then the field visit can be avoided as RERA shows the carpet area and there are other benefits too like the NRI buyer can check the status of project and there are remedies too in case of any fraud, late delivery of possession etc.
4. Verification- Documents presented to the buyer should be checked for authentication and verified thoroughly. Make sure that the documents are not forged and the seller of property is the rightful owner.
These mentioned things should be check by the Indian Resident before buying property from Indian residents or NRIs

Therefore, before buying any real estate or property in India the NRI should always obtain a proper legal consultation from the best real estate attorney or a property lawyer and should always avoid in investing in disputed properties or struck properties in India.
A well drafted sale deed can save the buyer from lot of legal complications and legal issues and in case of buying property from NRIs, the buyer should pay extra attention to whole transaction process.
Authored By: Adv. Anant Sharma & Anjali Swami

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