NRI Jointly Owned Property in India: Legal Rights and Options

For many years, the real estate market of India among NRIs has remained one of the most preferred investment destinations. However, for NRIs, it is quite complicated to manage property from another country, especially when another person also jointly owns it. Considering this, when NRIs jointly own property in India, various legal frameworks come into play. It includes the Indian Income Tax Act, 1961, the Transfer of Property Act, 1882, and the Real Estate (Regulation and Development) Act, 2016 (RERA).

Further, to protect ownership rights, NRIs need to understand these laws. To help you out in this, the blog contains all the details associated with NRI joint property ownership in India. So read on and gather all the information.

Legal Rights and Responsibilities of NRIs in Joint Property

An NRI jointly owned property in India that gets several benefits when shared ownership is between two or more individuals. Considering this, in two primary ways, this co-ownership can occur:

• Joint Tenancy: Under this, all the co-owners of the property have equal ownership rights. Additionally, on the passing of one co-owner, the property ownership automatically transfers to the other surviving owners.
• Tenancy in Common: Under this joint property ownership type, each co-owner have specific property share. Considering this, upon the death of one owner, instead of the surviving co-owners, their property share is transferred to their legal beneficiaries.

Additionally, under property law, NRIs jointly owning property in India enjoy several legal rights. These property rights ensure the protection and equity of the interests of co-owners. These include:

• Equal Rights of Possession: According to their piece of ownership, all co-owners have equal rights to possess and use the property. Although if there is a formal agreement, certain restrictions may apply to the use of the property. Additionally, no co-owner by force can be removed from the property.
• Right of Ransom or Sale: Subject to the condition that it should not impact the rights of the other co-owners, one co-owner can transfer or sell his/her share of the property to a third party.
• Right to Rent and Income: If the joint property is under lease, all co-owners are entitled to proportionately share the rent and additional income drawn from the property.
• Right to Partition: If among the co-owners there is a dispute, or if they want to divide the property, any co-owner has the equal right to request the property partition. In such a scenario, to ensure a fair property division and to resolve conflicts, a co-ownership dispute resolution mechanism may be used.
• Right to Transfer Ownership: Depending on the joint ownership form, co-owners may have the right to transfer their property share either with or without the permission of other co-owners.

Further, all joint owners of the property, including NRIs, should agree on key decisions such as rentals, property sales, or modifications. Additionally, to avoid future disputes, it is vital to formalize the ownership through a legally binding agreement.

So, this was all about the NRI property co-ownership rules. Moving ahead, let's know the tax implications for NRIs under the Income Tax Act, 1961.

Tax Implications for NRIs Under the Income Tax Act, 1961

When it comes to property ownership in India, NRIs have specific taxation rules. The primary NRI co-owner property tax in India includes:

Tax on Rental Income

If the jointly owned property by an NRI generates rental income, then in this scenario, the tax liability is shared among the co-owners according to their property share. As per section 22 of the Income Tax Act, rental income generated from Indian property is taxed under the "Income from House Property" head. Based on their residential status at the applicable income tax rates, NRIs are liable to pay tax.

Capital Gains Tax on Sale

When the jointly owned property by an NRI is sold, under the Income Tax Act, 1961, capital gains tax on NRI joint property is imposed. Here, the taxation depends on the holding period of the property:

• Short-Term Capital Gains (STCG): If the property is held for less than 24 months, the capital gains are treated as short-term and taxed according to applicable slab rates.
• Long-Term Capital Gains (LTCG): Properties held for more than 24 months are treated as long-term capital gains. Additionally, as per section 112, LTCG is taxed at 20% with indexation benefits.

TDS Implications for NRI Co-Owners

Apart from tax on rental income and capital gains, Tax Deducted at Source is also imposed on NRIs. Considering this, according to section 195, TDS at 30% is imposed on rental income generated by NRIs. Additionally, once the property is sold, NRIs need to pay TDS at 20%. Considering this, under Section 54 (reinvestment in another property) or Section 54EC (investments in specific bonds), NRIs can claim tax exemptions.

This was all about the tax on NRI jointly owned property in India. Moving further, let's know the repatriation of sale proceeds for NRIs.

Repatriation of Sale Proceeds for NRIs

NRIs have the right to repatriate the funds received from the sale of their jointly owned property abroad. However, for this, they need to follow the Foreign Exchange Management Act (FEMA) regulations. Considering this, after paying all the applicable taxes, NRIs using their NRO accounts can repatriate up to USD 1 million per financial year.

This ceiling is not only for property sales but also includes all remittances from India. Additionally, for the repartition of sale proceeds, all documents included Form 15CA, Form 15CB (CA certificate), tax clearances, and purchase proof, should be by your side.

So it was all about the repartition of sale proceeds for NRIs. Moving ahead, let's know about the compliance requirements of the RERA provisions.

Compliance Requirements under RERA

The Real Estate (Regulation and Development) Act, 2016 (RERA) was introduced to bring accountability and transparency to the real estate sector. NRIs involved in jointly owned NRI properties to avoid legal complications need to ensure compliance with RERA provisions.

Considering this, under RERA, the real estate developers must register their projects and provide complete information about the property. Additionally, when dealing with jointly owned property, NRIs should verify that the property is registered under RERA to certify that all legal obligations are fulfilled. Moreover, to the co-owners of the property, RERA also offers a grievance redressal mechanism. It enables NRIs to identify project delays and disputes.

These are the RERA rules for NRI joint property. Moving further, let's know the key legal considerations for NRI jointly owned property in India.

Key Legal Considerations for NRIs' Jointly Owned Property in India

There are several legal considerations comes with NRIs handling jointly-owned property. Considering this, here are a few key points that NRIs should keep in mind:

• Legal Agreements: It is vital to draft a co-ownership agreement specifying the ownership type of each co-owner, rights, and responsibilities. This further helps in avoiding disputes in the future. Additionally, ensures the property management is done smoothly.
• Succession and Inheritance: NRIs should have information about the inheritance rules applicable to their jointly owned property. According to the Indian Succession Act, in the absence of a will, the legal heirs of a deceased NRI co-owner inherit their share.
• Power of Attorney (PoA): NRIs who are unable to visit India frequently may appoint a trusted power of attorney (PoA) for managing their jointly owned property in India. It ensures that property-related decisions are made without any delays.

This was all about the key legal considerations for jointly owned property held by NRIs in India. Moving ahead, let's know the key challenges for NRI managing jointly owned property.

Key Challenges for NRI Managing Jointly Owned Property

The key challenges for NRI managing jointly owned property in India include:

• Legal Disputes: There are often disputes over rental income, property use, or sale of jointly owned property. NRIs should prepare to resolve conflicts through mediation or legal action when necessary.
• Communication with Co-Owners: For making joint decisions about the property, it is vital for NRIs to communicate regularly with the co-owners. Considering this, NRIs for discussing issues related to property should establish clear channels of communication.
• Tax Compliance: For NRIs, managing tax filings for property sales, rental income, and capital gains can be complicated, especially when residing overseas.

These are some of the key challenges that NRIs generally face when managing jointly owned property in India.

Final Thoughts

Lastly, an NRI jointly owned property in India comes with both legal and financial responsibilities. To ensure smooth property management, NRIs need to understand the legal rights, tax implications, and compliance requirements. Additionally, to safeguard their investments, NRIs should also explore all the legal options, like understanding tax obligations, drafting a property agreement, and ensuring RERA compliance.

Further, if you still face difficulty in managing your property in India, connect with Savetaxs. We offer personalized services that match your unique needs, whether it is for fund repatriation, selling the property, or resolving disputes. With us by your side, you can surely make correct decisions about your assets in India.