NRI can enter rent agreements in India regarding his property in India. There are various ways of making rent agreements without the physical presence of the NRI. This article entails certain such methods.
When an NRI has immovable property in India, he can let it out on rent. A rental agreement is one of the best ways to utilize your unused property and get an income for the same. When this immovable property is residential, the rental income that yields from the such property directly goes to his NRE or NRO account.
Rental apartments require an NRI rental agreement between the Non-resident and tenants. Now the legality of the rental agreement is the same as when entered between two residents. Some provisions need inclusion, and registration should be done. A rent agreement is a legal contract that requires registration to be binding on the parties.
For a Non-resident Indian, drafting a rent agreement by physically visiting the country can be somewhat challenging. There are various NRIs that own real estate buildings in India. Therefore, there are specific ways that aid the discomfort of people agreeing while sitting miles away from the property.
Prerequisites for a Rental Agreement
Before they give a house property for rent, various prerequisites need consideration like verification of the tenant, taxation of rental income, provisions of rental agreements, etc. The rental income from the property let out is taxed in both the country of residence and country source. The NRI has to refer to the double taxation agreement or a bilateral relief provided by the land of residence. That shall decide the taxation of such income.
The provisions of the rent agreement should outline all the guidelines the tenants and owners have agreed on, such as rent hikes, security deposits, responsibility, and variation of payments. These conditions are to be determined beforehand.
The background verification of the tenant is also necessary. As a landlord, one should exercise proper discretion and caution when entering rental agreements. NRIs cannot visit the property frequently, and therefore, the person to whom the landlord is giving the property for rent must be reliable.
Ways to Make Rental Agreements in India
Here are various ways an NRI can enter into an NRI Rental agreement in India.
Make a Power Of Attorney
For people who cannot be present with their NRI rental agreement and signature in India, there is an option to draft a power of attorney in favor of a person. This person should be a trusted one who uses the authority to benefit the NRI. The POA or the Power of Attorney transfers the property’s right of signing and authority to the person. Such a person takes care of the building in the absence of NRI.
Power of attorney is one solution that saves NRIs from the hassle of regularly coming down to India and with all the hassle regarding the property. What NRIs have to do is enter the POA. Even living abroad, they can draft it in favor of someone through Indian embassies present abroad.
There are two methods of carrying out the POA option abroad – Legalisation and Apostilisation. Various asset management companies take up the work of property legalities. The company is a legal person, and it can be held accountable. Therefore, this is the main reason NRIs trust such companies with their property.
Make an Online Agreement
In its arrangement of ensuring houses for every resident in India, the Government of India has eased the discomfort of NRIs in drafting rent agreements. They have provided the facility of online rent agreements. It can be digitally signed, and papers can be digitally transmitted to the owner.
When everything is digital, even the government prefers the NRIs to use emails as a medium for sending NRI rental agreements. Moreover, they are considered a safe mode of sending rent agreements. It makes the complete process online with no physical presence of the NRI in India.
Through this, they eliminate this geographical boundary and restraint of the rent agreement with online agreements. Various courts in India have approved the legality of online documents. Digital signatures hold valid authentication as well.
Local Help From People
The local guide or a company can be of help in such times. This local guide can be a family, relative, friend, or colleague. They can sign the rental agreement by the tenants and get it notarized in the notary office. They can then send the soft copy through email or other electronic media to the NRI. The NRI can take a printout and sign the agreement, as mentioned. The soft copy can be sent back to the tenant so that each of them has at least one copy of the document signed.
In-state the printout is not workable. Numerous online websites like Digi-sign and DocuSign enable digital signatures to be imprinted on documents. These e-platforms are completely recognized in Indian law and work as valid contracts.
Conditions of Income Tax and GST Registration
As earlier discussed, the NRIs receive the rent in an NRO account. Certain transactions require the permission of the Reserve Bank of India or the government of India when they are beyond certain limits specified under the Foreign Exchange Management Act 1999.
In the case of rent received by the NRI, no permission from RBI is needed. This property can be residential or commercial. The NRI, however, has to file an income tax return in the country of the source for showing income from the property. If TDS has been deducted in excess, he can also file for a refund through the ITR.
GST is not applicable for rental income earned from residential property to the non-resident. However, when NRI receives proceedings from commercial property, GST applies. The limit for the same is 20 lakh per annum. Beyond such a limit, GST registration is needed. The GST rate applicable to the rental income is 18%.
For a Non-resident person, the GST portal requires certain documents. The time limit to get registration is also different for the residents. It is always advisable to employ a professional for GST payments and returns in such cases.
The whole process of making an NRI rental agreement and understanding the process can get overwhelming for a person. Therefore, it is best to contact experts who help people carry out these processes smoothly. To know more about NRI rental agreements and other NRI legal services in India, visit Vakilsearch today.
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