1. Who Is Considered an NRI for Tax Purposes

For property taxation, an individual is treated as an NRI as per the Income Tax Act, 1961 if they do not satisfy the residential status conditions during a financial year. Tax rules apply based on residential status, not citizenship.

2. Eligibility of NRIs to Buy Property in Chennai

NRIs are legally permitted to purchase:

• Residential apartments
• Residential plots
• Commercial properties

NRIs cannot purchase agricultural land, plantation property, or farmhouses unless inherited or permitted under special approval.

3. Mode of Payment – Mandatory Tax Compliance

• Property purchase consideration must be paid only through banking channels
• Permitted accounts:
  • NRE Account
  • NRO Account
  • FCNR Account
• Cash payments are not allowed
• All payments must be in Indian Rupees

4. Stamp Duty and Registration Charges

• NRIs pay the same stamp duty and registration charges as resident Indians in Chennai
• Charges are calculated on:
  • Guideline value OR
  • Actual sale value (whichever is higher)
• No tax concession or surcharge applies solely due to NRI status

5. Income Tax Deduction Benefits on Home Loan

If an NRI takes a home loan for buying property:
Interest Deduction

• Up to Rs 200,000 per year for self-occupied property
• No upper limit for let-out property

Principal Repayment Deduction

• Up to Rs 150,000 per year under applicable sections
• Deduction allowed only if property is held for the minimum lock-in period

These deductions apply only against income taxable in India.

6. TDS Rules When Buying Property

Scenario A: NRI Buying Property from a Resident Indian Seller

• The buyer must deduct 1% TDS if property value exceeds the prescribed threshold
• TDS is deducted on the sale consideration
• A deposit of TDS is mandatory before registration

Scenario B: NRI Buying Property from Another NRI

• TDS provisions under Section 195 apply
• TDS rates depend on the holding period of the property:
  • Long-term capital asset: 20% + surcharge + cess
  • Short-term capital asset: 30% + surcharge + cess
• TDS is deducted on the entire sale value, unless a lower deduction certificate is obtained

7. Lower TDS Certificate

• NRI sellers may apply for a lower or nil TDS certificate.
• Issued by the Income Tax Department
• Allows TDS to be calculated on actual capital gains instead of total sale value
• Without this certificate, buyer must deduct TDS at full prescribed rates

8. Capital Gains Tax on Sale of Property by NRI

When the NRI sells the property:
Holding Period Rules

• Held for more than 24 months → Long-term capital gain
• Held for 24 months or less → Short-term capital gain

Tax Rates

• Long-term capital gains: 20% with indexation
• Short-term capital gains: Taxed as per applicable slab rates

The buyer is responsible for deducting TDS at source at the time of payment.

9. Repatriation of Sale Proceeds

• Sale proceeds can be repatriated up to USD 1 million per financial year
• Repatriation allowed only after the following:
  • Payment of applicable taxes
  • Submission of tax clearance documents
• Repatriation is permitted through authorized banking channels