Non Resident Indians (NRI) who are interested in investing in Property Share’s commercial property listings can do so through their Non Resident Rupee (NRE) or Non Resident Ordinary Rupee (NRO) accounts. However, as per RBI mandate, rent/dividends can be distributed only to NRO accounts.
Thus, an NRI investor must possess an NRO account.
Rental Income Tax
Since the property is registered in the name of the LLP, the incidence of the tax is also on the LLP. The LLP is required to pay 21.6% rental income tax . This tax is independent of the tax status of the investor (example: if the investor is domiciled in the Middle East, the tax is still payable by the LLP). However, once the tax is paid, the distributed rent/dividend is tax free in the hands of the investor. As per RBI mandate, rent/dividend can be distributed only to NRO accounts.
Capital Gains Tax
Property Share holds the property for 4 – 5 years. Post the holding period, the asset is sold and the profits from the sale are distributed to the partners in proportion to their holding. Capital gains tax is calculated and paid prior to profit distribution (read our blog on taxes) This tax is independent of the tax status of the investor (example: if the investor is domiciled in the middle east, tax is still payable by the LLP). However, once the tax is paid, the distributed profit is tax free in the hands of the investor. As per RBI mandate, profits can be distributed only to NRO accounts.
Repatriation
Both rent and profits earned can be repatriated from an NRO account to an NRE account by following the below process:
- Form 15 CB to be issued by a CA from their income tax portal. Following info to be filled
- Name & address of the beneficiary of the remittance
- Details of the bank from which funds are to be remitted
- Nature of remittance
- Agreement copy
- Post filling 15CB, 15CA to be filled on the income tax portal of the investor
- Post filling 15CB & 15CA, depending on bank from which remittance is being made, additional filling may be required