WHO IS A NRI OR A PIO ?
A Non Resident Indian (NRI) is a person of Indian origin but not residing in
India.
Under the Income Tax Act to be assessed as a "resident", an individual should
fulfill either of the two conditions:
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He should have been present in India in the previous year for at least 182
days. This period of 182 days need not be continuous.
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He should have been in India for at least 365 days in the preceding four years
and he stayed in India for not less than 60 days in the previous year in
consideration.
All those persons who are not 'residents' are called 'Non Residents'.
For the purpose of transfer of immovable property a Person of Indian Origin
(PIO) origin' means an individual (not being a citizen of Pakistan or
Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan) who
fulfils any of the conditions given below:
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He has held an Indian passport or;
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He or either of his parents or any of his grand-parents was a citizen of India
by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of
1955); or
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The person is a spouse of an Indian citizen or a person referred to in
sub-clause (a) or (b).
Rules relating to NRI / PIO investment in real estate have been considerably
liberalized and simplified. Foreign citizens of Indian origin (PIOs) have
been permitted to invest without the need to obtain approval from the Reserve
Bank of India. With the passage of FEMA, the power to effect repatriation
proceeds has been decentralized and delegated to authorized foreign exchange
dealers. What is more, even the rental income can be repatriated now. It makes
sense for NRIs now to earmark a portion of their investment portfolio in real
estate and earn competitive return on investment.
In exercise of the powers conferred by clause (i) of sub-section (3) of Section
6, subsection.
OVERSEAS CORPORATE BODY (OCB)
Overseas corporate body means
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Companies, partnership firms, societies and other corporate bodies
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Owned, directly or indirectly,
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To the extent of at least 60% by individuals of Indian nationality or origin
resident outside India as also overseas trusts in which at least 60% of the
beneficial interest is irrevocably held by such persons.
The various facilities granted to NRIs are also available, with certain
exceptions, to OCBs so long as the ownership/beneficial interest held in them
by persons of Indian nationality/origin resident outside India continues to be
at or above the level of 60%
FOREIGN DIRECT INVESTMENT IN REAL ESTATE
FDI provides for 100% foreign participation by NRI/OCB's in housing and real
estate development sector in following areas:
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Development of serviced plots and construction of residential premises
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Construction of residential and business premises including business centres
and offices
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Development of townships
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City and urban infrastructure facilities
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Manufacture of building material
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Participatory ventures in all of the above
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Investment in housing finance institutions
ACQUISITION OF PROPERTY IN INDIA BY AN NRI:
A person resident outside India who is a citizen of India may
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acquire any immovable property in India other than agricultural/plantation/farm
house.
TRANSFER OF PROPERTY IN INDIA BY AN NRI:
A person resident outside India who is a citizen of India may -
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Transfer any immovable property in India to a person resident in India.
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Transfer any immovable property other than agricultural or plantation property
or farmhouse to a person resident outside India who is a citizen of India or to
a person of Indian origin resident outside India.
ACQUISITION OF PROPERTY IN INDIA BY A PERSON OF INDIAN ORIGIN
A person of Indian origin resident outside India may -
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Acquire any immovable property other than agricultural land/farm house/
plantation property in India by purchase, from out of
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Funds received in India by way of inward remittance from any place outside
India or
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Funds held in any non-resident account maintained in accordance with the
provisions of the Act and the regulations made by the Reserve Bank under the
Act.
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Acquire any immovable property in India other than agricultural land / farm
house /plantation property by way of gift from a person resident in India or
from a person resident outside India who is a citizen of India or from a person
of Indian origin resident outside India
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Acquire any immovable property in India by way of inheritance from a person
resident outside India who had acquired such property in accordance with the
provisions of the foreign exchange law in force at the time of acquisition by
him or the provisions of these Regulations or from a person resident in India
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It is necessary for a PIO to purchase property through NRE or NRO accounts.
TRANSFER OF PROPERTY IN INDIA BY A PERSON OF INDIAN ORIGIN
A person of Indian origin resident outside India may -
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Transfer any immovable property in India other than agricultural land/farm
house/plantation property, by way of sale to a person resident in India
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Transfer agricultural land/farm house/ plantation property in India, by way of
gift or sale to a person resident in India who is a citizen of India
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Transfer residential or commercial property in India by way of gift to a person
resident in India or to a person resident outside India who is a citizen of
India or to a person of Indian Origin resident outside India.
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Transfer an immovable property being agricultural land or plantation property
or farmhouse in India by way of a gift or sale to a person resident in India
without any permission from the RBI provided that the purchaser is a resident
as well as a citizen of India.
ACQUISITION OF IMMOVABLE PROPERTY FOR CARRYING ON A PERMITTED ACTIVITY:-
A person resident outside India who has established in India in accordance with
the Foreign Exchange Management (Establishment in India of Branch or Office or
other Place of Business) Regulations, 2000, a branch, office or other place of
business for carrying on in India any activity, excluding a liaison office, may
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Acquire any immovable property in India, which is necessary for or incidental
to carrying on such activity; Provided that
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all applicable laws, rules, regulations or directions for the time being in
force are duly complied with; and
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the person files with the Reserve Bank a declaration in the form IPI annexed to
these regulations, not later than ninety days from the date of such acquisition
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Transfer by way of mortgage to an authorised dealer as a security for any
borrowing, the immovable property acquired in pursuance of clause (a).
REPATRIATION OF SALE PROCEEDS:-
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A person referred to in sub-section (5) of Section 6 of the Act, or his
successor shall not, except with the prior permission of the Reserve Bank,
repatriate outside India the sale proceeds of any immovable property referred
to in that sub-section
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In the event of sale of immovable property other than agricultural land/farm
house/plantation property in India by a person resident outside India who is a
citizen of India (NRI) or a person of Indian origin (PIO), the authorised
dealer may allow repatriation of the sale proceeds outside India, provided the
following conditions are satisfied, namely
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The immovable property was acquired by the seller in accordance with the
provisions of the foreign exchange law in force at the time of acquisition by
him or the provisions of these Regulations
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The amount to be repatriated does not exceed
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The amount paid for acquisition of the immovable property in foreign exchange
received through normal banking channels or out of funds held in Foreign
Currency Non-Resident Account or
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The foreign currency equivalent ,as on the date of payment, of the amount paid
where such payment was made from the funds held in Non-Resident External
account for acquisition of the property.
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In the case of residential property, the repatriation of sale proceeds is
restricted to not more than two such properties.
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In the case of the sale of an immovable property, other than an agricultural
land/farm house/ plantation property in India by an NRI or PIO, repatriation of
the sale proceeds outside India (including credit to RFC, NRE or FCNR
Accounts), is allowed.
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Sale proceeds of any immovable property inherited by NRI/PIO from a person
resident in India may be remitted abroad but the amount not to exceed USD one
million, per calendar year subject to production of documentary evidence in
support of inheritance and Tax clearance certificate/no objection certificate
from Income Tax authority to authorized dealer for remittances.
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The RBI has also now permitted authorized dealers to allow the facility of
repatriation of funds by NRI/PIO in their Non-resident Ordinary Rupee (NRO)
Account up to US $ 1,00,000 per year representing the sale proceeds of the
immovable property held by them for a period of not less than 10 years subject
to payment of the applicable taxes.
Prohibition on acquisition or transfer of immovable property in India by
citizens of certain countries.
No person being a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan,
China, Iran, Nepal or Bhutan without prior permission of the Reserve Bank shall
acquire or transfer immovable property in India, other than lease, not
exceeding five years.
GENERAL INFORMATION REGARDING REAL ESTATE:
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NRIs and PIOs may acquire any immovable property for residential/commercial
purposes in India, other than agricultural/plantation/farm house, without the
permission of Reserve Bank of India.
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No declaration is required to be made to the RBI. Only information regarding
details of the property and costs incurred should be given to the RBI. This
will help at the time of repatriation.
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No permission from the RBI is required to transfer any immovable property other
than the agricultural land or plantation property or a farm house in India by
way of sale to a person resident in India.
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The lock-in period of 3 years has been done away with.
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If property has been acquired through NRE account then repatriation is allowed
only for 2 residential properties.
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NRI/PIO is permitted to transfer by way of mortgage his residential commercial
property in India to an authorized dealer/housing finance institution in India.
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NRI/PIO can avail housing loan in rupees from an authorized dealer or housing
finance institution in India approved by the National Housing Finance Bank for
purchase of residential accommodation or for the purpose of
repairs/renovation/improvement of residential accommodation, subject to certain
terms and conditions.
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Sale proceeds of residential/commercial property received by way of gift by
NRI/PIO can only be credited to NRO account.
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Sale proceeds of any immovable property in India inherited, by a person
resident outside India (i.e. NRI or PIO or foreign national of non-Indian
origin resident outside India), from a person resident outside India cannot be
repatriated by him or his successor without prior permission of the RBI.
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NRI/PIO can rent out the residential/commercial property purchased out of
foreign exchange/rupee funds.
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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.
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The non-resident Indians who are staying abroad may enter into an agreement
through their relatives and/or by executing the Power of Attorney in their
favour as it is not possible for them to be present for completing the
formalities of purchase (negotiating with the builder or Developer, drafting
and signing of agreements, taking possession, etc.) These formalities can be
completed through some known person who can be given the Power of Attorney for
this purpose. Power of Attorney should be executed on the stamp paper before
the proper authorities in foreign countries. Power of Attorney cannot be
drafted on the stamp paper bought in India.
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Residential property can be given on rent if not required for immediate
residential use. Rental income cannot be remitted abroad and will have to be
credited to the ordinary non-resident rupee account of the owner of the
property.
TAX RULES
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No taxes to be paid while purchasing property.
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Certain taxes to be paid when selling property. If NRI/PIO has held property
for less than 3 years then he would have to pay 30% tax. If property has been
held for more than 3 years then tax payable is 20%. Tax is payable on rental
income too.
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At the time of renting out property or repatriation PAN card is required.
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