Real Estate India: Is my Rental Income upto $80K from my property in India free from US Taxation? What kind of forms I need to file in that case?

Question asked by Mr Rizvi from New York, USA:

Please can you help me with the following,

I have a rental property in India and I have been told that US TAx Laws allow me to deduct my foreign income upto some $80,000 per year. Can you tell me what form I need to use and if I need to do something on the Indian end?

An experienced and Practising CPA from USA - Mr. Udai B Singh Answers:

Answer from a Practising CPA in USA (Mr. Udai B Singh):

Law is this>>>

Foreign earned income upto $86k (or so) is tax free provided the person lived in foreign country and earned his livelihood while working there for at least 330 days. Refer Form 2555 for more details. Rest all income is taxed. Also, if the person does not qualify based on number of days presence in foreign country, income is again taxed in full, however, taxes paid on that income in foreign country could be claimed on US taxes on Form 1116. Thanks.

Regards,
UB

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Real Estate India: What can be done to stop the erection of transformer?

Question asked by Mr Binu from Bangalore, India:

Hello,
My name is Binu and I am in a sticky spot.

My family purchased a house in Bangalore, a gated community. It is currently under construction.

Now out of the blue, the developers of that area have decided to erect
a transformer next to our house, right adjacent to the house.

This was not disclosed earlier but also there is nothing in the contract to prevent the developers from using the rest of the land in the way they like.

It poses two problems, it is a nuisance, and hazardous plus it ruins the look of the house.

also the price would depreciate after the transformer is built. There are kids in our family and we would never live in this house if the transformer were to be built.
What in your opinion is our best bet. Is there anything we can do to prevent this from happening.

Thanks
Binu

Vatsala Answers:

Most transformers have safety standards to follow. If there is genuine danger, nuisance or undue hardship, you can send a legal notice to the developer and then follow it up by filing a suit in a court of law demanding appropriate relief.

Vatsala
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Real Estate India: Conversion of agricultural land into Non agricultural land (Commercial)

Question asked by Mr Prem from Karnataka:

Namaskar Vatsala,

Please can you help me with the following,

1. Can you tell me the time it can take to convert agricultural land into Non agricultural land (commercial) in (North) Karnataka, in rural area not in city or village

2. what are the official fees for converting agricultural land per acre (karvar district)

With friendly regards
Mr. Prem, Karnataka

Vatsala Answers:

The time taken is generally three to four months, after submitting the documents. The fee is about Rs. 1,25,000/- per acre for commercial use. Normally the conversion is linked with plan sanction and the conversion order is issued along with the sanctioned plan for commercial building.

Vatsala
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Real Estate India: How much VAT should be paid?

Question asked by Mr Moorthi Subramaniyan from Bangalore:

Hi Vatsala,

I am Moorthi, recently I got registered my flat in a small apartment (it has 12 flats) in Bangalore.

My agreement with builder is Rs. 9L for land cost & Rs. 21L for construction (including electricity, water, registration etc).

My question is, How much VAT I need to pay (based on 4%)? Can you help me on this?

Regards
Mr. Moorthi Subramaniyan
Bangalore

Vatsala Answers:

Service tax will not be attracted for a complex where the total number of Apartments is 12. Regarding the VAT liability, it may not be payable on the entire amount of Rs.21 lacs. Definitely the amounts charged towards cost of registration and obtaining electricity and water connection should qualify for abatement. On the balance amount, the builder has two options for collecting VAT, viz., either the compounding option or the actual value option. If he prefers compounding option then the VAT is payable on the balance amount at 4% in Karnataka. If the builder chooses collecting VAT on the entire balance amount because it is more beneficial to him, then it is payable at 4% to 12% (depending on the construction material) on actual value added after taking credit for the VAT suffered on the inputs. While you cannot force the builder to choose a particular option, if the builder does not go for compounding option, then you can apply compounding rate of 4% on the balance amount as aforesaid and compare the same with the VAT charged by the builder and check whether it is more favorable.

Vatsala
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Real Estate India: What would be the standard procedure to be followed to repay the housing loan?

Question asked by Mr Sunny Sureen:

Dear Vatsala,

Few years back my father had applied for a loan from LIC Housing Finance for construction( extension ) of his existing property. The papers of existing house were kept as a security. We are living in the same house till now. The loan was granted and it is being repaid in the form of EMIs. During the 1st year a part of the EMI was adjust for a premium payment of Insurance policy started at the time of approval of the loan. But it was discontinued due to financial constraints and the policy got lapsed.

A month back my father passed away and a major part of the loan is still outstanding. I am getting calls from the institution to pay the EMIs due since past few months. I told them the situation on phone. Now the institution is suggesting me to continue paying the EMIs till the entire loan is repaid.

Please suggest me what would be the standard procedure to be followed in this situation, so that later on I dont face any restrictions/hassles to get the papers of the property back.

For e.g. Should I transfer the loan in my name OR Get the entire loan amount repaid immediately OR Continue to the pay the EMIs for the remaining loan period.

Thanks and Regards
Mr Sunny Sureen

Vatsala Answers:

The obligation to pay the debts of the deceased falls upon the legal heirs. You can get a receipt for the repayment of the EMI in your name periodically. The bank is duty bound to hand over the documents to the legal heirs on discharge of the loan, whether it is one lump sum or repaid in installments. You are advised to contact the bank to check if there are any formalities that the bank requires in terms of paper work.

Vatsala
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Real Estate India: Repatriation by an NRI of All Proceeds from Sale of Residential Real Property in India, Purchased With Foreign Exchange

Question asked by Mr Suphal Agrawal from USA:

Gentlemen, I was referred to your site by one of my relatives in India.

I am a male of Indian origin, now a U.S. Citizen for several years. I am interested in purchasing residential real property near Mumbai with a goal to sell it later on (time not definite yet, but could be anytime after a year or so, depending upon the local market situation and my own financial plans) and then buy something else, but eventually I intend to repatriate all proceeds -- my original investment and all gains -- back into the U.S. Based on my extensive search on this topic, here is what

I understand:

1) I am classified as an NRI due to having held an Indian passport previously, and due to both my parents being Indian

2) As such, I can buy residential real property in India without any specific permissions; I can pay for it via wire transfer from my US bank to the seller's bank in India; later, I can sell it to an Indian citizen or another NRI but must hold it for at least three years after my last payment (or three years after registration, if paying all cash) -- language is confusing on this three-year-hold point; through an NRO account, I can have the seller repatriate proceeds to my US bank, but ONLY in an amount not to exceed my original payment for the property

3) As an NRI, I can only do a maximum of two such sales and repatriations (principal investment only) in my lifetime

Specifically, my key concerns are: 1) Can I repatriate all gains and all investments from the sale of residential real property purchased by paying for it in forex? 2) Can I do it as and when I choose? And, 3) Does my registration as a People of Indian Origin -- PIO -- have any impact on my ability to do these things?

I would very much appreciate your time in helping me with the above specific questions (particularly, repatriation of all proceeds from the sale of real residential property), and I will be especially grateful if you could reply at your earliest.

My contact information is noted below.

Thanks again.

Sincerely,
Mr. Suphal Agrawal, USA

Vatsala Answers:

1. You can very well purchase residential properties in India out of foreign remittance from abroad without any prior permission of the RBI.
2. However, the repatriation of sale proceeds of residential properties is restricted only to two properties.
3. There is no lock in holding period for sale and repatriation.
4. The amount repatriable will be restricted to the amount brought in by way of foreign currency. If it was acquired out of balances in FCNR/NRE account, it will be restricted to the value of foreign currency equivalent of the Indian Rupee used for acquisition on the respective dates on which the Indian rupees were paid for purchase of the properties.
5. The repatriation option is further subject to the condition of the applicable capital gains tax on the property having been paid already.

Vatsala
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Real Estate India: Information about selling gifted property

Question asked by Mr Asma Ashfaq:

Hello

I am interested in selling a property received through a gift deed from my father. Will this invite capital gains tax ?

Regards
Asma Ashfaq

Vatsala Answers:

You can sell the property received through gift deed from your father. It will definitely attract capital gains tax. After payment of the applicable capital gains tax, the balance amount can be repatriated upto a maximum of 1 million US Dollars.

Vatsala
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Real Estate India: What legal action can be taken against the builder?

Question asked by Mr Gautam Dutta:

Hi,

Recently, I have brought a property where after completion of sale deed builder is charging extra money for registration saying it was an approximate. But where as during the time of booking there was no approximation mentioned in the form and proof of which is the carbon copy. After booking of form they have manipulated the original form by writing approx on the right hand side of registration cost which is clearly not there in carbon copy. Second thing they have issued a letter for remodeling of house which they are delaying or trying to skip. They are charging money for extra registration cost as well as I may have to incur some loss for remodeling otherwise they are threatening not to give the possession certificate and parking allotment. Where as in Sale deed a covered area parking allotment is mentioned and they have already taken money for that. What all legal action can be taken for this and how long it can bother me?

With Regards
Mr. Gautam Dutta

Vatsala Answers:

You have to sue the builder in the consumer court having jurisdiction of the property and prove deficiency in service and ask for compensation with interest.

Vatsala
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Real Estate India: What are the documents needed to buy agricultural land?

Question asked by Mr Abhishek Samant from Mumbai:

Hi,

I just want to know the detail and documents to buy agriculture land. My grand father used to hold an agriculture land. Waiting for your response.

Thanks
Mr. Abhishek Samant, Mumbai

Vatsala Answers:

The documents to purchase agricultural lands are 1) parent deeds 2) RTC from 1969 onwards 3) Mutation certificates 4) Akarband 5) Tippany 6) Village Map 7) Family tree wherever applicable 8) Encumberance certificate and 9) Index of land and Record of rights, if available. This is a general list and may vary from case to case.

Vatsala
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Real Estate India: What is an elegibility criteria for a PIO card?

Question asked by Mr Mishaal from Africa:

HI,

I am a person of Indian origin but me and my family have been in Africa since 2 generations. My mother was born in India but we are unable to trace her birth certificate.

I have my 1st cousins in India in Bombay. Is there any way in which I can be elegible for a PIO card. If not, what is the alternate option for Investing in India

Regards
Mr Mishaal, Africa

Vatsala Answers:

Getting a PIO card is secondary. A person of Indian origin is defined as a person who has held an Indian passport at any time, or whose father or grandfather was a citizen of India. A person of Indian origin, can purchase property (except agricultural land) anywhere in India. No formalities are required except when sale proceeds are to be repatriated. Funds for purchase should be routed through normal banking channels. Spouses of Indian citizens are not considered as PIO’s.

Vatsala
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