FEMA – How it defines citizens

FEMA Foreign Exchange Management Act - immovable property in India

 The Foreign Exchange Management Act, 1999 enables the Reserve Bank to build laws to prevent, limit or control the acquisition or transfer of immovable property in India by the NRIs. The FEMA denies buying or transfer of real estate in India by the citizens of certain countries. It mentions – No person who is a citizen of China, Pakistan, Nepal, Bangladesh, Sri Lanka, Afghanistan, Iran, or Bhutan can acquire or transfer immovable property in India without prior permission of the Reserve Bank of India.

The FEMA manages the purchase of assets by Non-Resident Indians (NRI), Persons of Indian Origin (PIO), and Foreign Nationals/Citizens.

Defining Citizens

NON-RESIDENT INDIAN – An NRI (Non-Resident Indian) is a resident of India who holds an Indian passport and has provisionally immigrated to another country for six months or more for work, residence or any other purpose.

PERSON OF INDIAN ORIGIN – A PIO is an individual who has held an Indian Passport or whose father or grandfather or mother or grandmother once happened to be a citizen of India as per the Constitution of India or the Citizenship Act of 1955.

FOREIGN NATIONALS – A person is a Foreign National to India when he lives outside India and is not a citizen of India.

Immovable Property in India and Rules for Property purchase

NRI –

  • An NRI does not require any special permission to buy.
  • An NRI can purchase or acquire any immovable property in India other than agricultural land/plantation land/farm house.
  • She/he can transfer any immovable property in India to a person resident in India and to an individual who is a resident outside India or to a person of Indian origin resident outside India.

PIO –

  • A PIO also does not require any special permission to buy a real estate in India except for agricultural land/farm house/plantation property.
  • A PIO might acquire an immovable property other than agricultural land/farm house/plantation property in India. However, it can be a gift from a person who is a resident of India or a resident outside India who is an Indian citizen.
  • A PIO can sell any property in India except for farmland/farm house/plantation lands, by way of sale to a resident Indian.
  • A PIO can transfer agricultural land/farm house/ plantation estate in India, by way of grant or through sale to a person residing in India who is a citizen of India and any residential or commercial property in India by way of donation to a person living in India or outside India.

FOREIGN NATIONALS –

  • A Foreign National resident outside India cannot buy immovable property in India.
  • Also, one cannot obtain any immovable property unless such it is procured through inheritance from a person who was once a resident in India.
  • However, he can acquire or transfer immovable property in India, on a contract, not topping five years without having prior permission from the Reserve Bank of India.
  • However, a Foreign National on becoming ‘resident in India’ except for the citizens of China, Pakistan, Bangladesh, Nepal, Sri Lanka, Afghanistan, Iran, and Bhutan, can purchase immovable property in India without any prior approval from the RBI.
  • Foreign Nationals who have acquired or purchased immovable property in India by way of inheritance with the permission of the Reserve Bank of India cannot transfer such property without the prior authorization of the Reserve Bank of India.

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