Luxury Property Ownership and Wealth Transfer Planning for NRIs

In India, NRIs owning luxury properties are often seen as a symbol of success and a lucrative means of securing their financial future. These properties not only provide personal fulfilment but also serve as valuable assets for wealth generation. However, managing these assets across international borders presents challenges, particularly in succession planning and wealth transfer.

To ensure the seamless transfer of the properties to beneficiaries or legal heirs, NRIs can adopt effective wealth transfer strategies. This involves avoiding unnecessary complications, conducting thorough due diligence, and ensuring compliance with relevant laws and regulations. Let us explore further about luxury property ownership and how NRIs can effectively plan for wealth transfer.

Luxury Property Ownership for NRIs

As an NRI, you can own a luxury property in India and make it a rewarding experience, however, it is recommended to navigate across some important legal, financial, and other procedural nuances and have it all in place. Here’s how:

• NRIs can purchase residential and commercial properties, penthouses, villas, and luxury apartments. However, they are not eligible to own agricultural land, farmhouses, or plantation properties.
• The initial step in the entire process comprises choosing the property and ensuring it has a clear title and relevant legal approvals.
• NRIs can opt for financing property acquisitions via NRE (Non-Resident External) or NRO (Non-Resident Ordinary) accounts, this can be done by remitting funds from abroad countries.
• Also, Indian banks provide home loans to NRIs for conducting property purchases, the repayment of which can be done via their NRO or NRE accounts. NRIs must pay taxes on rental yields and capital gains. Hence, TDS compliance must also be taken care of while selling property.
• In case an NRI is not present in India, he/she can still appoint a Power of Attorney to handle transactions taking place in India. Managing a luxury property involves utilising professional services, ensuring compliance with local regulations, and maintaining the property.
• Though the luxury property segment in India comes with ample scope and opportunities for investment and returns, taking the help of legal experts or consultants can go a long way in making the process even more smoother and efficient. This will facilitate the completion of all the steps, from buying to managing with ease and in full compliance with the relevant Indian laws.

Read Also: Why NRIs Should Consider Gated Communities in Indian Cities

Tax Implications of Luxury Property Ownership

There are various tax implications of acquiring luxurious property in India and the process comprises considering aspects relating to income tax, compliance formalities regarding funds repatriation, and capital gains tax. Here is a brief glimpse of some key taxation implications:

• Tax on Rental Income: If you wish to rent out your luxury property in India, the income generated will be taxed under the head ‘’Income from House Property’’ in India. This taxation is applied after claiming relevant deductions under Section 24(a) of the Income Tax Act.
• Property Tax and Wealth Tax: In India, wealth tax was abolished in 2015, so no tax is levied on the property value owned by NRIs. However, property tax, charged by municipal authorities, applies to all properties, including luxury properties. The rate varies based on the location and the property’s value, making it an annual expense that must be paid by the property owner.
• Tax on Foreign Income: NRIs must pay tax only on their Indian income and not on their income derived from foreign sources. However, if the property reaps income (say rental income), that income becomes taxable under Indian laws, irrespective of the location of the NRI.
• Double Taxation Avoidance Agreement: India has entered into DTAA treaties with various countries to refrain from paying double taxes. If you are an NRI staying in a country with which India has entered a DTAA, you can claim relief from paying double taxes on capital gains and rental income.

This can be done by claiming exemptions under certain provisions or by offsetting taxes paid in India against the taxes to be paid in the foreign country. It is recommended that you refer to the DTAA provisions between India and your respective country of residence and then proceed accordingly.

Read Also: Navigating Currency Exchange and Financial Planning for NRI Property Purchases

Tips for NRIs on Wealth Transfer Planning

The following tips will allow you to ensure a seamless wealth transfer procedure, bring down tax implications, and ensure that you can pass on your assets as per your preferences:

• Make different wills for Indian and abroad assets to refrain from getting into issues between jurisdictions.
• You can consider creating a revocable living trust to transfer wealth privately and avoid probate.
• It is important to be informed about gift taxes, inheritance, and estate in India as well as your country of residence. You can use a Double Taxation Avoidance Agreement (DTAA) to alleviate double taxation.
• You can gift assets to decrease taxable estate and lower taxes for beneficiaries and heirs.
• Assigning beneficiaries to insurance policies and accounts to ensure a lucrative asset-transferring process can be of great help.
• It is important to update your estate plan to show modifications in family situations, monetary conditions, and taxation laws.
• Consider using life insurance to cover estate taxes or provide liquidity to heirs, as it can simplify the process of transferring wealth.
• Select a competent trustee or executor who can help you with Indian and international estate laws. Also, you can hold your assets jointly with family members to facilitate simple transfers in case of unforeseen events like death.

• You can get in touch with experts to handle assets in multiple locations and countries with efficiency.

Rustomjee’s Role in Assisting NRI Buyers

Rustomjee is one of the most reputed real estate developers in the country and is known for constructing premium-quality residential and commercial properties. The trusted developer has an important role in helping NRI buyers and providing solutions and services for property investments. Here’s how:

• Property-Related Advice and Consultation: Rustomjee is committed to offering customised consultation services to assist NRIs in knowing about the Indian real estate segment, particularly in metro cities like Mumbai. They provide expert insights regarding their projects, pricing, and anticipated returns.
• Digital Platforms: Rustomjee provides online tools and resources for NRIs to go through their exhaustive range of services, and properties and take virtual tours. This makes the entire property hunting process a lot easier and faster for buyers who are not present in India.
• Online Meetings and Guidance: Rustomjee provides choices to conduct meetings virtually and enables NRIs to put forward their preferences, solve grievances, and take the right steps in booking a property without having to be physically present in India.
• Repatriation: Rustomjee helps NRI buyers with repatriating sales proceeds, offering solutions as to how they can transfer money abroad after selling property in adherence to RBI rules and regulations.

Conclusion

Acquiring luxury properties and planning for wealth transfer requires careful consideration of various factors, including taxation, legal formalities, and cultural preferences. For NRIs, it is important to plan things carefully to ensure a smooth wealth transfer and planning procedure. This can be done by consulting financial advisors and legal experts so that NRIs can preserve the value of luxury assets and alleviate burdens for heirs.

To know more about wealth transfer and ownership for residential properties, contact us at Rustomjee and stay ahead of the financial and real estate curve with our expert guidance and insights.

FAQs

• What documents are needed for NRIs to purchase property?

For buying property, NRIs require a valid passport, visa and residence proof in the employing country. Also, they are needed to furnish a PAN card for tax compliance in India along with a Power of Attorney (if applicable) to handle property-related transactions in case they are not in India.

• How can NRIs ensure smooth wealth transfer of properties?

NRIs can transfer properties smoothly by having a well-drafted will or trust that mentions their wishes clearly. Contacting financial or legal consultants can help avoid complications regarding taxes, inheritance, and other cross-border rules and regulations.

• What are the tax benefits for NRIs owning properties in India?

NRIs can avail of tax benefits on Indian properties, such as deductions under Section 80C for home loan principal repayments and under Section 24 for home loan interest payments. Additionally, while rental income is taxable, NRIs can claim deductions for property-related expenses and maintenance charges, helping to reduce their taxable income.