The rent income is liable to income-tax

Q. I am an Indian citizen residing in Singapore since the last five years. Looking at the favourable exchange rate, I would like to purchase a residential house in Chennai. The money for acquiring the house would be remitted from my savings in Singapore. I would like to let out the house. Is that permissible? If so, what would be the income-tax implications on it? I do not have any other income in India, though I have an Indian bank account and a permanent account number (PAN) card.

Expert Comment: Since you are an Indian citizen, you are a non-resident Indian (NRI) under Foreign Exchange Management Act (Fema). An NRI can acquire an immovable property in India, other than agricultural land, plantation property or farm house under the general permission of the Reserve Bank of India. The property can be acquired from funds lying in the non-resident ordinary (NRO) and/or non-resident external (NRE) accounts. Alternatively, you can directly repatriate the funds through normal banking channels by way of inward remittance. You can’t, however, make the payment by way of travellers’ cheques and/or foreign currency notes or any other mode.

If the house is acquired for Rs.50 lakh or more, you will need to withhold tax at source at 1% from the payment made to the seller and deposit it to the credit of the government on behalf of the seller. This provision was introduced with effect from 1 June 2013.

You can let out the property and credit the rent received to your NRO account. The rent income is liable to income-tax as “income from house property”. You are entitled to a deduction of taxes levied by the local authority paid during the year and a further deduction of 30% thereafter. The balance amount of rent is liable to tax as per the applicable slab rates after considering the threshold exemption of Rs.2 lakh. You are liable to file your income-tax return if your total income after claiming deductions exceeds Rs.2 lakh for the financial year (1 April to 31 March).

Normally, the tax would be withheld at source by the tenant at the rate of 30.9%. The tax so withheld may exceed your tax liability. In such a case, you may file your return claiming the deduction of 30% and the benefit of threshold exemption and lower slab rates.

Repatriation of rent income to Singapore can be done after payment of due tax by obtaining certificate of a chartered accountant in form 15CB, stating that the amount proposed to be remitted is eligible for remittance and that applicable taxes have been paid. The overall limit for remittance of funds from India is $1 million per financial year.