I currently reside in the US (on H1B Visa) and I plan to buy property in India. The current owner of the property also resides in the US. I was wondering if I could make part of the payment here in USD legally? If yes, is there a limit on the maximum amount I can pay?
I was wondering if I could make part of the payment here in USD legally?
Although not directly illegal ...
From an India tax and FMEA point of view this would be a bit complicated.
A NRI Seller cannot repatriate the proceeds from sale of house unless he had purchased this from NRE account and repatriation is only possible for original purchase amount. For the gains Seller has to apply for repatriation of funds.
A NRI Seller has to pay taxes on gains and this transaction should not look like facilitating a tax fraud in case NRI Seller does not pay his taxes.
As a Buyer if you make the purchase from your NRE account [i.e. Move US funds into India into NRE Account], it will ease you ability to repatriate funds in future.
Depending on the property value and PAN card availability of seller, you have to deduct 1% to 30.12% tax from the value and deposit this with Income Tax India.
PS: It is recommended that you consult a Professional CA to help you with modalities.