NRI Property Management Services

Tips for Property Management Services in Chennai for NRIs

January 8, 2018 Manoj Sodhani Comments 0 Comment

Can you ever take a sound nap forgetting your Indian property while being on-ground in the US? It’s really hard to do so. You’ve acquired not only the value of your hard-earned but the emotional currency as well. You can’t look on the bright side only. The flip side also exists that spotlights the challenges.

Challenges:

Missing link between foreign country and India for NRIs:

Let’s say, you’re in a fix to manage your property in Chennai while living in the USA. You’ll be broke since you’d need to make ISD calls frequently. Taking a sigh of relief would be a blue moon. You’ve to resign your sleep and also, the rest.

What if your account is locked for the want of documentation?

Would you able to make transaction if your credit card is no more active?

Isn’t it a situation between the devil and the deep sea?

Solution: You can deal with all such problems with the help of the best and reliable NRI property management services in Chennai (or, wherever your asset is). Search out the one by the B2C model that can:

Provide the preventive maintenance. It would help in increasing the value of your asset. Quarterly maintenance of the property keeps it value intact. Thereby, the owner gets a rewarding profit on its sale.
Ensure higher quality of tenants. The indecent tenants can slap an enormous amount over the owner for undoing wears and tears. And, if they would be delinquent, the rental money may touch and go.
Follow stringent process of the rent collection. Monthly rental income is a plus for NRIs unless it is credited punctually as per a rental agreement. Otherwise, pulling out accumulated money is a hard nut to crack.
Quarterly visits. Regular inspection scans any damage before it goes irreversible. Therefore, the possibility of any delinquencies of the tenants in the premises can be eliminated.

Blind to market rules:

A happy event of buying a property with the perspective of rental income can result in nail-biting experience. Someone is always needed to take care of it. Otherwise, land mafia and encroachers tend to glue their bird view over the unnoticed piece of land. However, the NRIs are disallowed to invest in a plantation or agricultural land or a farm house. On the flip side, they can invest in any residential property. In it, they must have enough knowledge of the Indian real-estate market. They must look into these market solutions prior:

Solution:

Regulatory Act: This Act states the very fact that is mentioned above. Any non-resident can invest in the Indian property, except the agricultural land, plantation property or a farm house. This is subtly mentioned under FEMA (Foreign Exchange Management Act).
Types of property to invest: The Reserve Bank of India (RBI) has showered its mercy by allowing the sale and purchase of the property to the NRIs or PIOs. They can do such trading under the strict provision of no trading of any field, plantation area or the farmhouse. But if any of these comes to the foreign native (who has Indian passport) in inheritance or as a gift, he/she can trade it off.
Financial transactions and funding: The purchase of the property for the NRIs and PIOs requires the deal in Indian currency. For this purpose, the individual must have an NRO/NRE account in any authorized Indian bank. Even, post-dated cheque can also be issued for the payment.

Given that they should have at least 20% of the value of the property of their own, they can borrow for a maximum 80% funding. This trading can beat their brain out if any of the documentation work is pending or deferred or undone. It can be any due bill, due certificates from the seller and inherited/gifted property idea. So, going to such trade after verifying all papers with a certified lawyer would be a wise idea.

POA: Investment in an under-construction property requires empowering the power of attorney (POA) to the best property management company/ constructor/ builder/ dealer. Rather than showing bling faith to the dealer, verify it with a certified lawyer.
Tax Benefits: The Indian government avails a number of tax benefits to the investing NRIs. Thereby, the investor can figure out funds’ retrieval. Under Section 80 C of the Income Tax, 1961, it is stated that the NRIs can claim for tax deduction worth 1 lakh.

Selling it within a short interval of 3 years of the purchase is considered as a short term capital gain. It’s taxable. But if it is sold after 3 years, it would be termed as a long term capital gain. The investor, then, becomes eligible to enjoy tax leverages.

How to Save Capital Gain Tax on Property Sale?

July 4, 2017 Manoj Sodhani Comments 0 Comment

Tax is like a phobia for its payers. They have to pay a big share of their hard-earned money as the tax. Out of multiple taxes, capital gain tax is the most surprising one. Let’s catch on what it means.

What is Capital Gain Tax?

The tax levied on capital gain is determined as the capital gain tax. When we earn profit on the sale of capital asset, it is termed as capital gain. The capital assets include any stock, consumables, raw materials for business, personal goods, agricultural land in rural India, 6.5% gold bond or national defence gold bond, special bearer bond & gold deposit bond. The gain earned on these assets’ sale is taxable.

Capital gain is further divided into:

Long term capital gain: The capital asset held for more than 36 months is classified as long term capital gain.
Short term capital gain: The capital asset held for 36 months or less than this period is termed as short term gain. In case of immovable property, the duration is shrunk to 2 months.

There is an exception as well in the case of property. The inherited property by an NRI or emigrant or any native is not considered as the capital gain.

How much capital gain is taxable?

In case of long term capital gain, 20% of it is charged as the tax.
In case of short term capital gain, the capital gain tax is added to the taxable income.

Do you know that income from the sale of property is taxable? It implies that you have to pay tax if you sell the property. The money earned through that sale is considered as the income. You can get off that tax by investing in Indian share market because no tax is levied after one year of investment.

It’s just one trick to save tax on the sale of property. We have some more tax-saving tricks. Keep on reading to unearth what more strategies we have for saving tax, especially for providing best services to NRIs. These suggestions would be worth million dollars if implemented:

Compute ‘cost Inflation Index’ to get capital gains: Cost inflation index evaluates the inflation rate. It is used to compute long-term capital gains on the sale of capital assets. When inflation goes up, the cost inflation index also goes up in parallel.

For example, an NRI invested in a property worth INR 30 lakh. After 2 years, he desired to sell it. During meanwhile years, the inflation was evaluated 20%. After computing, the cost inflation index is evaluated as INR 6,000,00, i.e. 20% of INR 30,00,000.

With increase in prices, the real cost of property rolls up in the same ratio as in inflation during that period. Therefore, the capital gain would be contracted and so does the tax. The profit margin would be less.

The property owner should increment the real cost in correspondence to the cost inflation index. Thereby, the profit on sale of that property would reflect less.

How to know the cost inflation index?

The income tax department releases its table annually. 1980-81 is set as its base year wherein general prices are indexed as 100. As the price inflates, the index rises up gradually.

You should observe cost inflation index table to cut on taxes.

How to calculate Capital Gains using Cost Inflation Index?

Computation of capital gain:

Computing capital gain is not a big deal. Put the cost in this formula:

Capital gains=Sale price of the property-cost of the property

Computation of indexed cost of property

But if you want to derive actual capital gain after putting cost inflation index, compute this way:

Indexed cost of the property= Cost of the property X (Property’s cost inflation index in which it is sold/ Property’s cost inflation index in which it was bought)

For example, I bought a property in the year 2012, @ INR 10 lakh. After 3 years, I sold it @ INR 18,00,000. This is how I calculated the real cost of my property:

If I would simply determine the capital gain, it would be like this:

Capital gain of my property= INR 18,00,000-INR 10,00,000=INR 8,00,000

The cost inflation index of 2012= 785

The cost inflation index of 2015=1024

Indexed cost of my property=INR 10,00,000 X (1024/785)

Indexed cost of my property =INR 1304458.5987

Capital gain= INR 10,00000- INR 1304458.5987=INR 304458.5987

You can see that the real capital gain is just INR 304458.5987 which is far less than INR 8,00,000. Now, the calculation of capital gains tax on INR 304458.5987@20% would return INR 60891.71974 as payable.

Invest in a residential house: How is it if you are taxed for the sale of a residential property to buy another one for same purpose? Your motive here is to buy another place to live. In such cases, the income tax department provides relief under Section 54.

Even if you sell a non-residential property for purchasing a residential place, this Section heaves a sigh of relief. You need not pay capital gain tax in such case.

What does Section 54 (& 54F) state?

No capital gain tax on the capital gains from the sale of property that are invested in the purchase of new residential place.
No capital gain tax if the wholesome capital gain is absorbed in the purchase of new property.
Buying a new house is permissible one year prior to the sale of old house.
Constructing or purchasing a new house within 3 years & 2 years respectively from the sale of the old house is permissible.
The exemption on capital gains tax is limited to purchase of residential house.
The new residential house can’t be sold for 3 years. If so happens, the tax would be applicable from the date of acquisition or construction of the new house.
Section 54 states that the amount of exemption, in the foretold case, would be lower of capital gain or cost of the new house.
Section 54F states that the amount of exemption would be proportionate to the selling price and purchase price of the new residential house.

Invest in capital gain bond under Section 54 EC: It’s another capital gain tax saving trick which is really popular. You can invest in these AAA rated secure bonds and enjoy exemption.

Benefits of Capital Gain Bond:

No need to pay capital gain tax after investing in it.
The pan capital gain can be invested in it. No tax would be levied.
The investor would get interest @6% annually. But it’s slightly lower than the fixed deposits.
The interest you earn on capital gain is taxable but the TDS will not be deducted.
Invest in these bonds within 6 months of capital gain.
These bonds are valid for 3 years. No withdrawal is allowed meanwhile.
You can redeem capital gain bonds automatically after 3 years or maturity. Afterwards, no interest would be earned.
These bonds are not for sale or transfer.
If capital gain exceeds the value of these bonds, the difference would be taxable.
Its face value is INR 10,000.
You can start investing with minimum INR 20,000. It can be maximized to INR 50 lakhs in a financial year.
These bonds can be deposited in Demat account or in physical form.
NHAI and REC or their designated branches are government approved agencies for investing in capital gains bond.

Invest in Capital Gain Account Scheme: Unfortunately, some people find it an uphill battle to buy a new residential house post selling of the old one due to filing tax. They should not be anxious as they can invest in ‘Capital Gain Account Scheme’. You can keep your money safe in this scheme for 3 years. Even, you can withdraw it for constructing or purchasing a new residential property if you want meanwhile. It form can be downloaded from income tax website.

What does this scheme offer?

Invest before filing for income tax returns. State it in the income tax return form also.
Except ineligible corporate and regional banks, you can open capital gain account in the scheduled bank.
The options to deposit money in lumpsum & installment are available. But the gains must strictly be deposited before filing the income tax return.
If the deposited gains are locked down, you should open CGAS account and deposit gains in it.
Gains can be deposited in cash, cheque or draft.
This account is of two types, i.e. Account A & Account B, wherein Account A is similar to saving account. The interest rate is identical, i.e. 4%, as in ordinary saving account.

Account B is like fixed deposit. The money gets locked up for a specified time. The interest rate is equal to any ordinary fixed deposit account.

For lumpsum withdrawal of money to invest in residential property, choose Account B. But if you invest in construction, go for the Account A as you can withdraw periodically.
Expenditure of withdrawn gain from the account within 2 months is mandatory.
Reserve Bank of India fixes its interest rate.
These are transferable from Account A to Account B or vice versa.
The account is not for mortgage or loan.
Interest earned on deposition of capital gains is taxable. TDS is deductible.

Capital Loss: It’s an opposite of capital gain. When the amount of sale of property is computed less than the cost of its purchase, it is termed as capital loss. Like capital gains, it is also categorized as long term capital loss and short term capital loss.

Capital loss can help you escape capital gain tax provided that:

It has been born before capital gains.
Short term capital gains are adjustable to short term capital loss.
Likewise, the long term capital gains would be used to get relief from the long term capital loss.
Capital loss can be adjustable in the 8 subsequent years. Bu the carried forward loss must be mentioned in the income tax return form.
Long term capital loss of securities would not be adjustable in to the long term capital gains. For example, you can’t carry forward the long term capital loss to your long term capital gains in equity mutual funds.
Capital loss would be carried forward only if the income tax return is filed on or prior to the last date of income tax return filing.

Tips for Property Management & Registration in India

October 13, 2016 Manoj Sodhani Comments 1 comment

Purchasing a piece of land or apartment/flat requires huge investment. And this investment comprises of hard-earned money. A mistake can push an innocent in the trap of land-mafia or fraudulent.

This blog can work to guide the aspiring property investors for making a fair deal. Let’s start with property registration description.

Registration Act

The process of registration is executed under the Registration Act 1908 in India. It was formulated to:

Record authentic details of any immovable property in which the buyer is interested.
Maintain proper records of the property & related transactions.

The government has delegated registering rights district-wise. It provides more convenience & legitimacy to the governance.

The registration process has three main levels. Each buyer should walk through these levels to orient land/property registration. These are:

Levels of Registration

Mandatory level: The Registration Act mandates:

Registering documents of the immovable property.
Registering the WILL (It’s not compulsory but doing so credits extra-ordinary comfort & convenience in its maintenance.)

Timeframe: Its second level points to the time-period within which documents must be submitted for processing.

The related papers of the property must be registered within 4 months. This duration begins since the day the documents of the property are submitted.
In case its owner is offshore, the registration span will begin from the day of its arrival in the country. It will last till 4 months from that day.

Confused over where should NRIs or locals go for submitting the documents? Let’s catch where and in whose presence property’s papers must be registered.

At the office of sub-registrar situated nearby the property’s location.
Both, buyer & seller, & their representatives/Power of Attorney holders must be present there. Both parties must sign the papers in the very presence of the registrar.
Even, immovable property is transferred in the very presence of the registrar. For transferring, seller and buyer should sign, put thumb impressions on the papers and attest passport size photographs in his presence.

Final Registry: Once all formalities are conducted, the registrar verifies and cross-checks all the documents. Once finding all papers & detail authentic & registration fee paid, he:

Enter the records in the government’s book under the banner ‘Registered’. Then, he attests them. This way the Pan Endorsement procedure gets completed.
The documents get effective from the date of endorsement or any specified date but not from the date of registration.

Checklist of property documents needed:

Title deed attested by the Sub-Registrar (It identifies the real owner of the property.)
Completion Certificate
Map
Sales deed
Approved copy of plan from the local authority (if purchasing vacant land)
Agreement of sale (registered)
Cross-check the papers of the property if it belongs to the second owner.
Utilities bills (cleared or paid)
Khata/ Patta
Encumbrance certificate
NOC if the property is resold.

Precautions to take while purchasing a flat/ vacant land:

Determine the reputation of the builder/ realtor if he is efficient in property management or not. If the realtor fails to approve loan from the banks, it certifies the seller is not so trustworthy.
Check all the documents carefully and thoroughly. They should be issued by a certified lawyer. Cross-check them with your own lawyer.
Check if the building plan is approved by the Municipal authority and AE or not.
Check the project delivery if it is on time. If it delays, the realtor can impose the inflated prices of products upon the buyer.
Take every detail of housing project in writing. Verbal promises usually end in disputes. So, avoid such practice.
Take completion certificate issued by the competent authority before possession.
Read the papers of Title carefully. The attorney holder can change it for fooling the ignorant.
Avoid payment in cash since payment through cheque can be repatriated easily (if required).

10 Qualities of a Real Estate Consultant

February 19, 2016 Manoj Sodhani Comments 1 comment

Investing in property is not as easy as a walk in the park. An NRI faces alike problems as an indigenous one. But hiring a veteran real estate consultant with good repo can solve most of his problems. Hiring any consultant of the housing sector may leave you puzzled. But a professional consultant can win half of the battle of property investment for you. However, he should have honesty, sugary tongue and self-driven personality. But these traits are not enough. The Indian diaspora abroad should look an acknowledged one. That consultant should have map of localities and market scanned in his mind. Built up connections with MCD, real estate companies, appraiser and other housing departments would be appreciable if the real estate consultant has these. He should be excellent in pursuing the buyers and sellers of property. Negotiation abilities will be in his blood. His utmost good faith among the property buyer and seller community can help the buyer as well as the seller of the property. As a middle man, he should look after buyers and sellers’ requirement carefully. Paperwork is the most burdensome task to battle with. He should be well versed with it. Acting as a legal advisor, he should have every detail regarding home loan, other property documentation and its taxation policies. Mostly NRIs think about what taxation policies regarding property should be executed. They don’t of have idea of the recent amendments and the prevalent laws. Most of the worries about receivable payment hover over the mind of the seller. And the buyer falls in between the dilemma whether he would get the charge of the property within the said timeframe or not. The real estate consultant sorts all these problems himself. If he possesses all these qualities, the migrant can take a sigh of relief during property investment. …

Guide to Ensure Protection of NRIs Property

January 6, 2016 Manoj Sodhani Comments 2 comments

NRI property management becomes tougher to handle. Living overseas or offshores creates multitudes of seams in maintaining and managing NRIs property in India. Hassles will make their presence felt every now and then but few protective measures can halt them. Property’s protective measures are categorized into two, i.e. land-specific and tenant-specific. Fencing, gate, hanging a board, giving PoA to the reliable kin, renting it. Google Maps and installing cameras are the best protective measures specifically for land. Latter measures of property’s protection are tenant-specific. The NRI should appoint an advocate to look into the matter of bills, drafting rent/lease agreement and their renewal. The owner should go for police verification of the tenants and their registration. Maintaining records of bills and rent/lease renewal on computer can be beneficial and helpful in litigations. He should be alert if his parents or old relatives are playing the role of his property’s caretaker. …

NRI Property Management Tips to Escape FATCA

December 21, 2015 Manoj Sodhani Comments 3 comments

FATCA Legislation

These days, most of the non-residents of India (NRIs) in the US are countering discomfort. India and the US governments have signed a deal under the banner ‘FATCA’ which is the US’ Foreign Account Tax Compliance Act. Since I have been living in America for half a decade I am very much aware of this act. It is ratification by the United States Department of Treasury and the US internal Revenue Service (IRS) that observes and takes action against the tax invasion in the US.

This act will cross examine if the NRIs as well as the US natives (in India) are paying tax on income generated from the wealth abroad or not. …

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