Queries by NRIs on taxation in real estate

I have been living in the Gulf for the past 15 years and invested in overseas assets including real estate, securities and savings. I may return to India shortly. What are the tax implications in such a scenario? Please advise. Pratab Shetty, Sharjah
In the event of returning to India permanently, you can continue to retain foreign earnings, securities, savings, real estate, etc. when you had acquired overseas assets as an NRI. However, the income accruing from the assets will be taxable in India once you qualify as a resident in India. However, you can continue to enjoy the tax exemption for two years upon acquiring the status of ‘not ordinary resident’. When you file the income tax return in India, you are required to disclose all foreign bank accounts and assets, which is now mandatory.

A group of NRI investors prefer to jointly go for real estate development in Indian cities. What is the ideal entity that would benefit us? Vishal, Dubai

It is suggested to form a partnership firm and all partners should contribute to the capital of the partnership firm. The minimum number should be 2 and the maximum could be 20. The firm can also take up further loan which is available from the bank and other financial institutions. You could even go for a bigger loan amount for larger asset size. By this way, the administrative hassles would be less for the NRI partners. There are other options of entity like private limited or public limited company but the compliance procedures are tedious.

From the point of view of tax planning, partnership firm is the ideal option as you could distribute the profit to all the partners after making 30% income-tax by the firm without attracting any additional income-tax burden.

I own an apartment and commercial property in India which are lying vacant. Is it safe and beneficial to give it on rent and are there services available for renting? Please clarify. D L Pradhan, Abu Dhabi
You can rent the premises without any hassles today as there are property management companies that will take care of your property in a professional manner.

A few foreign companies have already entered India specialising in property management services. Moreover, you have tax advantages while renting your property. Normal deduction is available apart from 30 per cent deduction towards repairs, maintenance and collection charges, even if you have not incurred these expenditures. Moreover, complete deduction of interest payment for purchase of property is available from the rental income.

Notes:
India construction
India is among the fastest growing construction market globally and is poised to become the third largest globally by 2025 with size of $1 trillion, according to KPMG International’s Global Construction Survey 2016. The increasing size and quantum of projects is gradually driving complexities and unprecedented project risks in construction industry. However, despite substantial investments, the construction industry is struggling to gain the full benefits of technologies including advanced data and analytics, mobility, automation and robotics.
PE fund managers believe that consumer centric businesses will be their biggest focus, followed by sectors such as financial services which mirror the overall anticipated growth in the Indian economy, according to PwC survey. They also expect infrastructure to be back in investment focus in the next two to three years, and eventually contribute significantly to investments over the next 10 years.

PE deals, both in size and nature, will increasingly turn closer to those seen in some developed markets over the next 10 years. And it may be no surprise if India sees over $40 billion PE investments in 2025. In a landmark order, the Madras high court had imposed a ban on registration of sale deeds concerning houses on unauthorised plots to prevent flooding and haphazard development in the state. The court further directed the inspector general of registration to circulate the order in this regard.

Author: V Nagarajan, is a business analyst covering Indian property market

Credits Gulf Today

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