A very valued section of our customers are part of the Indian Diaspora. They need to be aware of the rules for buying or investing in Flats in Apartments in India. We have attempted to detail most common FAQs here and have provided links to certain important sites.
1. Who is a Non Resident Indian (NRI)?
An Indian Citizen who stays abroad for employment/carrying on business or vocation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad is a non-resident. Persons posted in U.N. organizations and officials deputed abroad by Central/State Governments and Public Sector undertakings on temporary assignments are also treated as non-residents.
2. Who is a person of Indian Origin (PIO)?
A foreign citizen (other than a citizen of Pakistan or Bangladesh) is deemed to be of Indian origin, if, – He, at any time, held an Indian passport, or – He or either of his parents or any of his grandparents were citizen of India by virtue of the Constitution of India or Citizenship Act, 1955 (57 of 1955).
3. Who can purchase immovable property in India?
Under the general permission available, the following categories can freely purchase immovable property in India:
— Non-Resident Indian (NRI)
— Person of Indian Origin (PIO)
4. Whether NRI/PIO can acquire agricultural land/ plantation property/ farm house in India?
No. Since general permission is not available to NRI/PIO to acquire agricultural land/ plantation property / farm house in India, such proposals will require specific approval of Reserve Bank and the proposals are considered in consultation with the Government of India.
1. Do non-resident Indian citizens require permission of Reserve Bank to acquire residential/commercial property in India?
No, permission is not required from RBI to purchase residential/commercial properties.
2. Do foreign citizens of Indian origin require permission of Reserve Bank to purchase immovable property in India for their residential use?
Reserve Bank has granted general permission to foreign citizens of Indian origin, whether resident in India or abroad, to purchase immovable property in India for their bona fide residential purpose. They are, therefore, not required to obtain permission of Reserve Bank.
3. In what manner the purchase consideration for the residential immovable property should be paid by foreign citizens of Indian origin under the general permission?
The purchase consideration should be met either out of inward remittances in foreign exchange through normal banking channels or out of funds from NRE/FCNR accounts maintained with banks in India
4. What are the formalities required to be completed by foreign citizens of Indian origin for purchasing residential immovable property in India under the general permission?
They are required to file a declaration in form IPI 7 with the Central Office of Reserve Bank at Mumbai within a period of 90 days from the date of purchase of immovable property or final payment of purchase consideration along with a certified copy of the document evidencing the transaction and bank certificate regarding the consideration paid.
5. Can foreign citizens of Indian origin acquire commercial properties in India?
Yes. Under the general permission granted by Reserve Bank properties other than agricultural land/farm house/plantation property can be acquired by foreign citizens of Indian origin provided the purchase consideration is met either out of inward remittances in foreign exchange through normal banking channels or out of funds from the purchasers NRE/FCNR accounts maintained with banks in India and a declaration is submitted to the Central Office of Reserve Bank in form IPI 7 within a period of 90 days from the date of purchase of the property/final payment of purchase consideration.
6. Can they dispose of such properties?
Yes, such properties can be disposed at will.
7. Can sale proceeds of such property be remitted out of India?
Yes. Repatriation of original investment in respect of properties purchased by foreign citizens of Indian origin on or after 26th May 1993 will be allowed to be remitted up to the consideration amount originally remitted from abroad provided the property is sold after a period of three years from the date of the final purchase deed or from the date of payment of final installment of consideration amount, whichever is later. Applications for the purpose are required to be made to the Central Office of Reserve Bank within 90 days of the sale of property in form IPI
1. What is the Tax treatment for property rental income for NRIs?
The mere acquisition of property does not attract income tax. However, any income accruing from the ownership of it, in the form of rent (if it is let out) /annual value of the house (if it is not let out and it is not the only residential property owned by that person in India) and/or capital gains (short term or long term) arising on the sale of this house or part thereof is taxable in the hands of the owner.
2. Do NRIs have to file return in India for his property rental income and Capital Gains Tax?
The government of India has granted general permission for NRIs to buy property in India and you do not have to pay any taxes even while acquiring property in India. However, taxes have to be paid if you are selling this property. Rental income earned is taxable in India and you will have to obtain PAN and file return of income if you have rented this property. On sale of the property the profit on sale shall be subject to capital gains. I If you have held the property for less than or equal to 3 years then the gains would be short term capital gains, which are to be included in your total income as tax as per the normal slab rates shall be payable and if the property has been held for more than 3 years then the resultant gain would be long term capital gains subject to 20% tax plus applicable cess.
3. How does double taxation treaty work in the context of tax on income and capital Gains tax paid in India by NRI?
India has DTT’ s with several countries which give a favorable tax treatment in respect of certain heads of income. However, in case of sale of immovable property, the DTT with most countries provide that the capital gains will be taxed in the country where the immoveable property is situated. Hence, the non-resident will be subject to tax in India on the capital gains which arise on the sale of the property in India. Letting of immovable property in India would be taxed in India under most tax treaties in view of the fact that the property is situated in India.
1. Does capital Gains Tax (CGT) apply to NRIs?
Yes. long-term and short-term capital gains are taxable in the hands of Non – residents.
2. How does double taxation treaty work in the context of CGT paid in India on The foreign tax treatment?
In case the non-resident pays any taxes on capital gains arising in India, he would normally be able to obtain a tax credit in respect of the taxes paid in India in the home country, because the income in India would also be included in the country of tax residence. The amount of the tax credit as also the basis of computing the tax credit that can be claimed are specified in the respective country’s DTT and is also dependent on the laws of the home country where the tax payer is a tax resident.
1. Can property be sold by NRI/PIO without the permission of Reserve Bank?
Yes. Reserve Bank has granted general permission for sale of such property. However, where the property is purchased by another foreign citizen of Indian origin, funds towards the purchase consideration should either be remitted to India or paid out of balances in NRE/FCNR accounts.
2. Can sale proceeds of such property if and when sold be remitted out of India?
In respect of residential properties purchased on or after 26th May 1993, Reserve Bank considers applications for repatriation of sale proceeds up to the consideration amount remitted in foreign exchange for the acquisition of the property for two such properties. The balance amount of sale proceeds if any or sale proceeds in respect of properties purchased prior to 26th May 1993, will have to be credited to the ordinary non-resident rupee account of the owner of the property.
3. Are any conditions required to be fulfilled if repatriation of sale proceeds is desired?
Applications for repatriation of sale proceeds are considered provided the sale takes place after three years from the date of final purchase deed or from the date of payment of final installment of consideration amount, whichever is later.
4. What is the procedure for seeking such repatriation?
Applications for necessary permission for remittance of sale proceeds should be made in form IPI 8 to the Central Office of Reserve Bank at Mumbai within 90 days of the sale of the property.
5. Can foreign citizens of Indian origin acquire or dispose of residential property by way of gift?
Yes. Reserve Bank has granted general permission to foreign citizens of Indian origin to acquire or dispose of properties up to two houses by way of gift from or to a relative who may be an Indian citizen or a person of Indian origin whether resident in India or not, subject to compliance with applicable tax laws.
6. Can immovable property held in India, be transferred by way of gift to relatives/registered charitable trusts/organizations in India?
Yes. General permission has been granted by Reserve Bank to non-resident persons (foreign citizens) of Indian origin to transfer by way of gift immovable property held by them in India to relatives and charitable trusts/organizations subject to the condition that the provisions of any other law, including Foreign Contribution (Regulation) Act, 1976, as applicable, are duly complied with.
1. Can the properties (residential/commercial) be given on rent if not required for immediate use?
Yes. Reserve Bank has granted general permission for letting out any immovable property in India. The rental income or proceeds of any investment of such income are eligible for repatriation.
2. If the rental income from property repatriable then what are the RBI rules?
The rental income, being current account transaction, is repatriable, Subject to the appropriate deduction of tax and the certification thereof by a Chartered Accountant in practice. Repatriation of sale proceeds is subject to certain conditions. The amount of repatriation cannot exceed the amount paid for acquisition of the immovable property in foreign exchange.
1. Can NRIs obtain loans for acquisition of a house/flat for residential purpose from authorized dealers/financial institutions providing housing finance?
Reserve Bank has granted general permission to certain financial institutions providing housing finance e.g. HDFC, LIC Housing Finance Ltd., etc., and authorized dealers to grant housing loans to non-resident Indian nationals for acquisition of a house/flat for self-occupation subject to certain conditions. The purpose of the loan, margin money and the quantum of loan will be at par with those applicable to housing loans to residents. Repayment of loan should be made within a period not exceeding 15 years out of inward remittances or out of funds held in the investors’ NRE/FCNR/NRO accounts.
2. Can Indian companies grant loans to their NRI staff?
Reserve Bank permits Indian firms/companies to grant housing loans to their employees deputed abroad and holding Indian passports subject to certain conditions.
3. Can authorized dealer grant housing loan to non-residents of Indian nationality where he is a principal borrower with his resident close relative as a co-obligant/guarantor or where the land is owned jointly by such NRI borrower with his resident close relative?
Yes. However, in such cases the payment of margin money and repayment of the loan installments should be made by the NRI borrower.
1. RBI (NRI FAQ) : http://www.rbi.org.in/scripts/faqview.aspx?id=52
2. Indian Income tax: http://www.incometaxindia.gov.in
3. Ministry of External Affairs : http://mea.gov.in
Given above are very broad guidelines compiled by us for ready reference with respect to acquisition and disposal of immovable property in India by Non Residents of Indian Origin. The prospective acquirer or seller of property in India must consult his / her own legal / finance / tax advisor and obtain suitable advise for their specific transaction. Sekhar Developers assumes no responsibility or legal liability for transactions entered in to relying merely on these FAQs.
