NRIs tend to fight shy of investing in property in India, as doubts on unethical practices followed by developers abound. However, with global players firmly entrenched in the industry, transparency and professionalism is steadily transforming Indian realty.

From consultants to financers to developers and construction companies, Indian real estate is witnessing a sea change in terms of operations. With regulatory practices in the property market also to be enforced in due course by the government, investment in Indian property is not just a safe, but a very rewarding option for NRIs.

For Investment in property in India, an NRI can avail the following beneifts under the Income Tax Act, 1961:

1) There is a complete exemption from income tax in respect of the deemed or likely income from any self occupied house property, if an NRI owns or buys only one house property or a part thereof in the form of a flat, an apartment or an independent bungalow. In case of two or more self occupied house property, only on one of the properties, such exemption will be applicable. The extra self occupied house property, will be liable to tax in respect of the deemed rental income except in case of such properties are in the name of his wife, major son or daughter, brother, sister, father, mother or in the name of Hindu Undevided Family.

2) There is a deduction alowed while computing any other income from any other source like taxable salary income, interest income, business income, etc.,  in India under the provisions of sections 24 of the Income Tax Act upto INR 150,000 per annum in respect of interest payable on home loan for consutruction or reconstruction or for the purpose of purchasing any self occupied house property, if such loan is taken after 01 April 1999 and the self occupied house property is acquired within three years from the end of the finanacial year of the loan.  

3) On Let-out house property, an NRI can invest in for acquiring one or more commercial house property. His liablity in India is to the extent of net rental income from such house property but he would not suffer any loss while selling the same, as on selling he or she can claim 100% income tax exemption under section 54 of the Income Tax Act, 1961. 

4) Under Section 71 of the Income Tax Act, 1961 an NRI can set off any loss under "Income from House Property" against any income of the same year under any head or incase of such set off is not possible in the same year, the same can be carried forward for the next eight assessment years against any income from house property.

5) On Sale of a Residential House Proeprty, an NRI can get 100% income tax exemtion in respect of long term capital gain tax, if he or she uses the sale proceeds to acquire, buy or constrcut another residential house property within three years of sale of the first residential house property (either self occupied or let-out house property which is kept for more than three years since acquisition) subject to some procedural rule of keeping the unspent money under the capital gains account scheme of a bank.
 
6) 100% tax exemption in respect of long term capital gain on sale of other asset like shares, debentures, jewellery, commercial house property, urban land, etc., and if the NRI is not the owner of a residential house property, and he or she invests the sale proceeds of the other assets into buying, acquiring or constructing a residentail house property under the provisions of section 54F of the Income Tax Act, 1961.

7) 100% long term capital gain tax exempted is the net proceeds of sale of real estate or any other capital asset is invested within 6 months of such sale or transfer of asset or property, into Rural Electrification Corporation Bonds, redeemable after 5 years. However if one part of the sale proceeds only invested in such bond, then exemption is proportionately allowed to the NRI.

8) Benefit of cost inflation index is available to the NRI for the purpose of computable long term capital gains under the provision of section 48 of Income Tax Act, 1961. Cost Inflation Index is notified by the Govt of India from time to time.

9) An NRI is not allowed to purchase any agricultural land or a farm house in India directly in his or her name, however, he or she can purchase in the name of his or her indian resident spouse, father or mother.