Non-resident Indians (NRIs) buy property in India for their use, rental income, and long-term investment. However, the Indian government provides certain rules and regulations for buying property in India. The property registration process, applicable laws, and tax implications are important for a smooth transaction.

Who Can Buy Property in India?

• NRI: Can purchase property in India, but there are some specific rules and regulations regarding:
• Residential Properties: They are free to buy any residential properties.
• Commercial Properties: There are no restrictions on NRIs buying commercial properties in India.
• Agricultural Land: NRIs need specific approval from the government before they may purchase any agricultural land in India.

Eligible Countries for Property Buying in India:

• Indian Citizens Residing Abroad: Proof of Indian citizenship is required for purchasing property in India.
• Persons of Indian Origin (PIOs): A person of Indian ancestry but holding citizenship in other countries can also buy property in India.

The countries are eligible to buy the properties in India.

• United States
• Canada
• United Kingdom
• Australia
• New Zealand
• South Africa
• Singapore
• Gulf countries
• European Union member countries

Rules for NRIs to Buy Land in India Under the Property Rights Act

Mode of Payment for Property Purchase

• Payments of property are to be made by NRIs through Indian banking channels.
• Payment can be made in Indian rupees (INR) drawn from any NRE (Non-Resident External) or NRO (Non-Resident Ordinary) account.
• Traveler's cheques or foreign currency are not accepted as payment.

No Special Approvals Required

• NRI does not need any special permission from the Reserve Bank of India (RBI) to buy residential or commercial property.
• FEMA guidelines allow them to engage in property transactions directly.

Repatriation of Sale Proceeds

• If an NRI sells property in India, they can repatriate the sale proceeds (the money earned from selling the property) under certain conditions:
• Under RBI rules, they can repatriate up to two residential properties, and the amount that can be repatriated is limited.
• You have to repatriate through suitable channels of NRE / NRO accounts only.
• The original purchase amount (principal) can be repatriated, but capital gains are subject to taxation and other limitations.

Taxation on Property Purchase and Sale

• Property Purchase: Stamp duty and registration charges apply to NRIs and resident Indians.
• Rental Income: Under Indian law, rental income from a property in India; pay taxes, and NRIs are required to file income tax returns in India as to such income.
• Capital Gains Tax: A seller of the property, based on how long they held the property, is liable for short-term or long-term gain tax for capital gains for the NRI. The tax rates are:
• Short-Term Capital Gains (if sold within 2 years): According to the income tax slab rate applicable for the NRI.
• Long-Term Capital Gains (if sold after 2 years): provided indexation benefits, subject to a flat rate of 20%.

Power of Attorney (PoA)

• If the NRI person is not there in India to handle the property of registration with a trustable person, give the power of attorney to complete the registration process.

Tax Implications

• Residential, commercial, and even agricultural property can be inherited by NRIs from Indian residents.
• An NRI can sell or gift the property he has inherited, but while transferring the proceeds of selling or gifting property out of India, the rules of FEMA are applicable.

Joint Ownership Rules

• However, an NRI can independently or jointly with another NRI purchase property. Ownership with another person who is not an NRI (a non-resident Indian) is not allowed except with a person who is an Indian citizen.
• An NRI is not allowed to possess an asset with a person who is not an NRI (a non-resident Indian) except with an Indian citizen.

Registration Process for NRIs

The property registration process involves several steps:

Documentation: Note the required documents below:

• Title deeds of the property
• Passport, Visa
• PAN Card
• Photographs
• Sale Agreement
• Stamp Duty Payment: Based on the property's market value, each state has a different price for stamp duty you pay.
• Registration with Sub-Registrar: To register, the buyer and the seller must meet in person at the local sub-registrar office, and all relevant documents should be shown for completion of the process.
• Obtain Encumbrance Certificate: Following registration, submit the encumbrance certificate that proves your property is legally free.

Property Registration Process for NRIs

However, the property registration process for NRIs is the same as that for Indian residents. Here are the basic steps:

1. Verification of Property Documents: Property titles should be cross-verified, and there should be no legal dispute if you are an NRI buyer.
2. Agreement to Sell: The buyer pays the token amount in the sale; both buyer and seller sign the sale agreement.
3. Registration: The sale deed is registered in the local sub-registrar's office where the property is located.
4. Stamp Duty & Registration Fees: Stamp duty and registration charges are paid at the time of registration.
    
5. Documentation: Required documents are gathered, which include:
   • Title deeds of the property
   • Visa, Passport
   • PAN Card
   • Photographs
   • Sale Agreement
      
6. Stamp Duty Payment: Pay the stamp duty (which differs from state to state and is based on the property's market value).
7. Registration with Sub-Registrar: The buyer and seller visit the sub-registrar office on time and carry the necessary documents to complete the registration process.
8. Obtain an Encumbrance Certificate: After the registration, you will have to apply for an encumbrance certificate to prove that your house is free from legal dues.
9. Verification of Property Documents: There should not be any legal disputes.
10. Agreement to Sell: A token amount is paid by the buyer and the seller signs the sale agreement.
11. Registration: This registered sale deed is also stored in the local sub-registrar's office of the area where the property is situated.
12. Eligibility for Home Loans: Indian banks allow NRIs to take home loans to buy residential property for which they hold eligibility criteria.

The loan must be repaid by using funds from an NRE, NRO, or FCNR (Foreign Currency Non-Resident) account.

Final words:
Real estate in India still tops the investment chart for NRIs and is easily accessible with the right set of rules and regulations set by FEMA and RBI, more importantly, the types of properties NRIs can invest in, payment modes employed, as well as tax implications. If documented properly, paid through the proper channel of payments, and adhering to the legal framework within India, NRIs are not at a loss investing financially in India as they get to own a property.