US NRIs are selling their properties in India due to implementation of FATCA
FATCA
Same as bank accounts and mutual funds, its not easy task for the Indian government to identify the property of NRIs and their earnings from them. There are many US based NRIs, who are planning to sell their property in India and for that they are ready to offer big discounts and the reason behind that is the implementation of FATCA (US Foreign Account Tax Compliance Act).
Recently, US and India have signed a new information sharing protocol which will bring the properties, assets, bank accounts, capital market investments and mutual funds under investments in India under the scan of US tax authorities. Now US if going to implement US Foreign Account Tax Compliance Act (FATCA), which aims to ensure that wealthy NRIs are paying tax on the income generated from overseas investments and properties. Due to FATCA, US have to share information about citizen’s assets in every other country. Now NRIs have to share details of their assets with US authorities.
According to BigDeals.in, a Gurgaon-based online property portal, “We have received several enquiries from NRI clients, which are from US in last two months. According to Ashwin Chawwla, CEO of BigDeals.in, “Some of these people are asking about more clarity on the issue as they are little confused about what’s happening and how they have to deal with this issue”. The more he added that while others are asking him to dispose their property in India in very short duration, and they are ready to offer big discounts, as law FATCA is not clear. It is well known fact that in past two decades many NRIs have invested in the real estate sector in India and now property market is on its peak, especially in the regions such as; Gurgaon and NCR. I bought a bungalow in Surat before three years ago for long term investment, but now am planning to sale it, as per the statement of Jignesh Shah, an engineer who works in Silicon Valley. Apart from that on the other side some of the US based NRIs are transferring their property to relatives instead of selling them.
According to one of the tax adviser, who help NRIs with property in India, “If property is first transferred and then sold, so the acquaintance or relative can emit back the money to the US citizen, as currently they are allowed to send $ 2,500,000 or Rs 16.6 crore per annum. And if the property is not transferred, so they can keep the cash in the separate account or tax paid on the amount received through the cheque. In present, there are two different schemes which are operational in US for NRIs with an aim to declare their wealth back home in India. First; there is no penalty for those, who will declare their liability, tax and income generated over the past three years from overseas properties. However; in other scheme; NRIs can pay tax of last eight years with interest and the penalty of 27.5 percent with an aim to compensate it.
According to one of the real estate experts, NRIs are not only selling their property in India, but at this point of time they are avoiding any kind of investment in India as this can lead them towards tax complications in the future. The more he added that Indian banks are reluctant to open accounts, which will help the US based NRIs to invest in India through different accounts because it can increase their reporting obligations.
