Purchase of Property: NRI (Non Resident Indian) can purchase any residential or commercial property with the permission from the RBI. However the NRI cannot purchase any agricultural land, plantation property or farmhouses in India. So, if an NRI wants to purchase a farmhouse or plantation, s/he will have to approach the RBI for specific permission and the RBI will consider this on a case-to-case basis.
If the NRI is planning to purchase a property with the idea of selling it after some appreciation, the cost of a buy and sell that includes registration, brokerage, etc., that can total about 10% should be considered. Also, the exchange rate differences and the maintenance cost during the period should be factored into the transaction. The absolute gain should be more than to cover the costs.
Sale of Property: NRI can sell a residential or commercial property in India but must comply with all the relevant rules. This sale can be to a resident of India or another NRI or PIO (Person of Indian Origin). Inherited agricultural land or farmhouse can be sold only to an Indian resident.
NRI needs to pay tax on Short term Capital Gain or Long term Capital Gain as applicable on the sale. This tax can be avoided by reinvesting the capital gain value as per Indian Tax laws, which can includes repurchase of a property or invest in certain bonds of the government with a specified period. There is a TDS deduction obligation under Section 195 of the Income Tax Act when purchasing the property from NRI. This TDS is high and can be reduced by getting a certificate from the tax department. The net sale proceeds are credited to the NRO account, as and remittance can be made of funds per regulations.
In case NRI is not possible to attend to procedures, he can issue a special power of attorney to a trustworthy person in India, who can handle it on your behalf.
Further details can be found in the RBI website
