Things to know before buying property from NRI ( buyer’s perspective)

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When we are on a house hunt we might come across many lucrative deals where NRIs are involved as it is very common in big Indian cities for non-residents to own properties in India and are willing to sell their properties at reasonable amount, but as a buyer you should be aware of few things when trying to bag the deal from a NRI or OCI (Non-residents).

  1. TDS (Tax Deducted at Source): When you buy a property from NRI/OCI, Buyers are liable to deduct TDS when buying property as per Income Tax Act (ITA) which may be greater than 20% . If the buyer does not deduct TDS and the tax is not paid as per income tax laws by the seller, buyer is eligible for penalty by income tax department.
  2. PAN Card: Make sure the NRI seller shows you their PAN card, and check that the name matches the one on the sale deed (the official document showing the sale).
  3. Getting a TAN: If you’re buying from an NRI, you might need to get a TAN, which is another tax-related ID. This is because you’re handling the tax part for the government by deducting the tax from your payment to the seller.
  4. More Down Payment: Since you may have to pay 22-23% of the property price upfront as TDS before you even register the property, your down payment requirement increases despite banks willing to offer you greater percentage of loan amount. This may disturb you loan planning.
  5. Payment from payment in their NRE (Non-Resident External) / NRO (Non-Resident Ordinary) / FCNR (Foreign Currency Non-Repatriable) accounts: When buying a property from an NRI, you might find that to simplify the process, the seller prefers receiving the payment in their Indian bank account. While this might seem convenient for both parties, it’s important to proceed with caution. This approach can sometimes lead to legal issues that complicate the transaction rather than simplifying it.
  6. Risks and Logistics: Buying from someone living in another country can be a bit tricky. There might be more risks or complications in sending money overseas or making sure all the paperwork is correct.

Understanding these points can help you be more prepared and avoid any surprises when buying property from an NRI. It’s always good to do your homework and maybe even get advice from a professional if you’re unsure about anything.

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