Introduction

Eluru, a picturesque town located in the heart of Andhra Pradesh, has been a cherished hometown for many NRIs who are now considering investments in luxury flats. Apart from the emotional connection, there are several compelling reasons for NRIs to invest in real estate here. This blog will delve into the tax benefits and legal considerations that NRIs should be aware of when investing in luxury flats in Eluru.

Tax Benefits for NRIs Investing in Luxury Flats in Eluru

Income Tax Exemptions

Rental Income: NRIs can earn rental income from their luxury flats in Eluru, and this income is subject to income tax in India. However, there is a standard deduction of 30% to cover maintenance expenses and a 30% tax on the net income after deductions. This can help reduce the taxable portion of rental income.

Home Loan Interest Deduction: NRIs can claim deductions on the interest paid on home loans for their luxury flats in Eluru under Section 24(b) of the Income Tax Act. The maximum deduction allowed is up to ₹2 lakh per financial year.

Capital Gains Tax

Short-term Capital Gains: If an NRI sells their luxury flat in Eluru within two years of acquiring it, any profit earned is considered a short-term capital gain and is taxed at the applicable slab rate.

Long-term Capital Gains: If the NRI sells the property after holding it for more than two years, it qualifies as a long-term capital gain. The tax rate is 20%, and NRIs can avail indexation benefits to reduce the tax liability.

Double Taxation Avoidance Agreement (DTAA): India has DTAA agreements with several countries to prevent double taxation of income. NRIs should check if their home country has a DTAA with India to avail of tax benefits.

Legal Considerations for NRIs Investing in Luxury Flats in Eluru

Eligibility to Buy Property: NRIs are eligible to buy residential and commercial properties in India, including luxury flats, without requiring prior approval from the Reserve Bank of India (RBI).

Documentation: NRIs should ensure that all property transactions are carried out with proper documentation. This includes verifying property titles, obtaining a no-objection certificate (NOC) from the developer, and ensuring all due diligence is performed.

Payment Modalities: Payments for property transactions should be made through proper banking channels, such as NRE (Non-Resident External) or NRO (Non-Resident Ordinary) accounts. NRIs can also avail of home loans in India for their property investments.

Power of Attorney (PoA): NRIs often use PoA to facilitate property transactions remotely. A trusted representative in India can act on their behalf for property-related matters. It’s essential to ensure the PoA is properly drafted and notarized.

Tax Deduction at Source (TDS): When NRIs sell a property, the buyer is required to deduct TDS from the sale proceeds and deposit it with the Income Tax Department. NRIs should be aware of the TDS rates and procedures to avoid complications.

Stamp Duty and Registration: NRIs must pay the applicable stamp duty and registration charges for their luxury flats in Eluru. The rates may vary based on property value and location.

Compliance with FEMA (Foreign Exchange Management Act): NRIs must adhere to FEMA guidelines while conducting property transactions. FEMA rules govern the repatriation of funds from property sales, among other aspects.

Conclusion

Investing in luxury flats in Eluru, your cherished hometown, can be a rewarding decision for NRIs. Not only can it offer a sense of connection to your roots, but it can also provide financial benefits in terms of rental income and potential capital appreciation. However, understanding the tax benefits and legal considerations is crucial to ensure a smooth and legally compliant investment journey. By staying informed and seeking expert advice when needed, NRIs can make the most of their real estate investments in Eluru.