V Nagarajan: Norms for owning more than one property in India

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I have invested in two residential units in Hyderabad. The home loan I took for investment is being paid from my NRO account in India. I have also borrowed funds from my relatives while investing in property. As I am on a short assignment in the Gulf, what are the tax implications in India with the income derived from both the units? Please clarify. Umesh, Sharjah
If you own more than one house, only one house property can be considered as ‘self-occupied’ and the other will be considered as ‘deemed to be let out’. In which case, notional rent of all properties other than the property that is self-occupied will be considered as income for tax purposes. To arrive at the taxable income, certain deductions are allowed.

Interest taken for purchase of the property is one among them depending on whether the property is self-occupied or let out. While the normal deduction is Rs200,000, for let out or deemed to be let out property, the entire interest paid for investment in the property including from your relatives will be allowed as a deduction without any limit. You can set off loss, if any, against salary or other income during the same year. Further loss, if any, can be carried forward for the next eight years, which will be available for set off against income from house property.

Can I transfer the sale proceeds of residential property mortgaged to an institution now? What about balance amount in the sale proceeds that cannot be remitted abroad? Praneeth Kumar, Dubai
At the outset you cannot sell the property without clearing the existing mortgage loan with the institution. You can sell the property by entering into an agreement with the buyer with the stipulation that the sale is subject to clearance of the mortgage loan commitment. Where the initial investment was made through an NRE or FCNR account or direct remittance through banking channels, there is no cap on repatriation of the amount of initial investment. While repatriation is restricted to a maximum of two residential properties, any balance amount can be credited to NRO account in India. You can later remit under the US$1 million facility available to NRIs like you every financial year.

I am an NRI living in the Gulf for the past 10 years. Can I inherit immovable property from another NRI, who is my relative? Are there any restrictions or do we need RBI permission to effect this inheritance? Please advice. Anand, Abu Dhabi
As an NRI you can inherit immovable property from a person resident in India or a person resident outside India. However, the person from whom the property is inherited should have acquired the same in accordance with the foreign exchange regulations applicable at that point of time.

Notes:

Investment made simple

The government has approved a proposal allowing investment made by NRIs to be deemed as domestic investment on part with resident investments. The Union Cabinet also approved the proposal that NRI includes OCI cardholders as well as PIO cardholders.

The government decided to amend the FDI policy to incorporate the definition of NRI as an individual resident outside India who is a citizen of India or is an ‘OCI cardholder within the meaning of Section 7(A) of Citizenship Act, 1955. PIO cardholders registered as such under a notification issued by the centre are deemed to be ‘OCI cardholders’. All this will enable investments by NRIs, Overseas Citizen of India (OCI) and Persons of Indian Origin (PIO) cardholders under Schedule 4 on non-repatriation basis, across sectors, without being subjected to the conditions associated with foreign investment.

Structured Debt Deals Up

Nearly 53% of the total number of real estate private equity transactions in India between 2010 and 2014 came in as structured debt deals. While 53% of total number of real estate private equity deals were structured debt type, 35% in value terms came in as structured debt deals. In value terms, share of structured debt real estate private equity deals increased from 31% in 2010 to 37% in 2014, according to Cushman Wakefield survey. In terms of citywise contribution, Mumbai leads with 33% share in total deal value and 32% share in total number of deals.

In terms of asset-wise contribution, residential sector had a major share in the structured debt deals. Around 80% (in value terms) and 94% (in number of deals) was pertaining to residential assets.

Structured debt office transactions were around 18% in value terms and 3% in terms of total number of deals, whilst the rest came from retail and mixed-use assets.

$1.2tr Retail Sector

India’s retail sector is likely to touch $1.2 trillion by 2020 from the current level of $550 billion, helped by a rapid growth in the e-commerce market which will grow to over $100 billion during the period, according to CII. E-commerce is driving thoughts of customers and retailers but that does not mean brick and mortar channel is going to be killed, said CII sources.

Article source: http://gulftoday.ae/portal/8773d4fe-7e23-4236-a2de-185aa18893f1.aspx

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