Buying A Resale Home from NRIs

When you are ready to buy a home, it’s not always necessary to buy a newly constructed one. The house you have your eye on is likely a resale one. A resale home was purchased and is now for sale by the initial owner or buyer. There is a certain procedure that you should follow while buying a resale home, you can read about it here. The same process is followed when you are buying a resale home from an NRI, save for a few differences, we talk about that in this article.

Buying A House from an NRI And the Role Of POA

When you want to buy a home from an NRI and you notice that they are going to return to the country sometime soon, what happens? In this case, if the NRI still wants to go through with the sale, they will grant POA to someone they trust. POA or Power of Attorney is a legal authorisation given to a person by the NRI to represent him and act on his behalf. If an NRI is selling property in India and can’t be here, this is the only other alternative.

If the POA was granted overseas, then the document should be executed by the Grantor before The Indian Consulate Officer. The original document should also be adjudicated at the jurisdictional District Registrar’s office. To avoid tax implications, some NRIs consider buying property in their parents' names, but this approach comes with its own set of considerations.

Quality Service Guarantee Or Painting Free

Unbeatable Price 5-Star Rated Partner! 2200+ Shades! Top Quality Paint Free Cancellation!

Get a rental agreement with doorstep delivery

Rental Agreement NOW

Find the BEST deals and get unbelievable DISCOUNTS directly from builders!

Find the BEST deals

5-Star rated painters, premium paints and services at the BEST PRICES!

FREE Estimate

If you are planning to buy the home through a loan from a bank or HFC (housing finance companies), then you will need to get the POA done as per their proforma. This information is easily available when you contact the bank or when you visit their website

How TDS is Calculated While Buying a House From An NRI

It’s important to note that the duty of paying TDS falls on you as the buyer, if this is not done, you can expect an inquiry made into your property purchase. The TDS is as follows –

• TDS of 22.88% - for property valued above Rs.50 lakhs to Rs.1 crore
• TDS of 23.92% – for property valued above Rs.1 crore
• TDS of 20.80% - for property valued below Rs.50 lakhs

The Importance and Procedure of Paying TDS

This deduction is made as per Section 195 of the Income Tax Act, here it states that the buyer has to deduct tax on the capital gains of the seller. Although many argue that the tax should be calculated only on the Capital Gains amount and not the full value, you as a buyer can’t do much about it.

The seller will have to go meet with an income tax official who will recalculate and maybe give the seller a rebate based on a certificate that is provided. It is not up to you to make this calculation, if you pay less than the deal value, you can expect a call from the tax department and be labelled as a defaulter. Note, the TDS can be paid by the seller as well, but if it's not paid the seller is not the one who gets into trouble, it will be you who is held responsible. After you have deposited the TDS, you will also need to submit form 16A to the seller.

If there is a delay in paying the TDS, there is a penalty amount of 1% -1.5% of the amount that you will have to pay per month. If you file late, there is a penalty of Rs.200 per day and it could even go up to 1lakh in total.

TAN Account

It is also important to have a TAN account this is a Tax Deduction and Collection Account Number. As per section 195, you cannot deduct TDS without a TAN account. If this is missing, you might again be penalized by the Tax Department. It’s important to note that if you are buying the property jointly with another person, both of you need to have TAN accounts or you will both need to apply for accounts.

Transaction Through POA

Buying a resale home from an NRI seller using a Power of Attorney (POA) is possible, but there are some important precautions to take:

Validity of the POA:

• Registered POA: A registered POA is mandatory. Notarised POAs are not sufficient. The POA needs to be registered at the sub-registrar's office in the jurisdiction where the property is located.
• NRI Execution: If the NRI seller executes the POA abroad, it must be attested by the Indian Consulate or Embassy in that country.
• Validity Period: The POA should be used within three months from the date of execution.

Payment:

• Don't pay the POA holder: The buyer should transfer the money directly to the NRI seller's NRE or NRO account. Even if the POA allows the holder to receive payment, it's safer to avoid this.

Important Points to Remember

•  You must insist that the deal can take place only if they accept the payment in their NRE (Non-Resident External) / NRO (Non-Resident Ordinary) / FCNR (Foreign Currency Non-Repatriable) accounts. To make the processing of selling their home easier, they might suggest making the payment to their Indian Bank account, however, this is not advised and might lead to legal complications. You will need to also mention clearly the sellers account details in your Sales Deed.
• The seller must have a PAN (Permanent Account Number)

• Double-check with OR hire professionals who deal with NRI real estate dealings. These experts will see to it that the deal goes off smoothly and there are no legal issues.
• Regulations around NRI's immovable property can affect who they can sell to and what type of property they can hold.

Is it advisable to buy a property from NRI?

Buying from an NRI can be a good option if you find a great deal and properly manage the potential drawbacks. Here's what to consider before making a decision:

• Have a lawyer: Involve a lawyer specialising in real estate transactions with NRIs to navigate legalities and ensure a smooth process.
• Do your research: Conduct thorough due diligence on the property and the seller's ownership rights.
• Understand tax implications: Be clear on the TDS requirements and any potential capital gains tax for the NRI seller.

Clear communication: Maintain clear communication with the seller (or their POA holder) to avoid delays or misunderstandings.

These tips on buying property from NRI’s should make the buying process a little simpler. However, if you have any more questions do write to us, NoBroker will help you find, and provide you with assistance, to get the home of your dreams. When we buy property from NRIs, it might seem like a daunting task, but with the right team by your side you won’t have any problems.

Recommended Reading

Legal Due Diligence for NRIs in Indian Real Estate

December 3, 2024

257+ views

Pros and Cons of Pre-Launch Property Investments for NRIs: Key Insights for Smart Investors for 2024

November 26, 2024

216+ views

How to Sell a Vacation Home or Second Property: A Complete Seller’s Guide for 2025

November 26, 2024

177+ views

New Rules for NRI in India: Essential Tax Updates

October 16, 2024

689+ views

Loan Against Property for NRI: A Guide to Flexible Financing: Benefits, Eligibility & More in 2024

September 30, 2024

356+ views

Most Viewed Articles

Know About ICICI NRI Account: Document Required, Eligibility and Application Process in 2024

October 11, 2024

21328+ views

NRI Power of Attorney: Empowering Overseas Decision-Making

December 24, 2024

9257+ views

Best NRI Accounts in India 2025

December 20, 2024

8141+ views

NRE vs NRO Account: Understanding the Difference for NRIs

April 21, 2024

5937+ views

The Ultimate NRIs Guide to Buying Property in India

July 12, 2017

4340+ views