• Who is a NRI?
  
  As defined by the Foreign Exchange Management Act of 1999 (FEMA), Non Resident Indian (NRI) is a citizen of India, 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. Non-resident foreign citizens of Indian Origin are treated at par with Non Resident Indian (NRIs).

• Can a NRI/PIO acquire agricultural land/plantation property/farm house in India?
  
  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

• What mode of payment can an NRI/PIO make to purchase a residential property in India?
  
  Under the general permission, an NRI/PIO may purchase a residential property in India by funds remitted to India through normal banking channel or funds held in his NRE/FCNR (B)NRO account. No consideration shall be paid outside India.

• Can a NRI/PIO transfer his residential property by way of gift?
  
  Yes. An NRI/PIO can transfer their residential property in India by way of a gift to an Indian resident/NRI/PIO

• Can a PIO transfer his residential property by way of sale?
  
  Yes. Under general permission an NRI can sell his or her residential property in India to an Indian resident only.
• Can a NRI transfer his residential property by way of sale?
  
  Yes. Under general permission an NRI can sell his or her residential property in India to an Indian resident/NRI/PIO
  
  
• Who is a PIO?
  Person of Indian Origin (PIO) (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan), who
  
  (a) at any time, held Indian passport, or
  
  (b) who or either of whose father or whose grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).
  
  Note: A spouse (not being a citizen of Pakistan or Bangladesh) of an Indian citizen or of a person of Indian origin is also treated as a person of Indian origin for the above purposes provided the bank accounts are opened or investments in shares/securities in India are made by such persons only jointly with their NRI spouses.

• Who is OCI?
  
  (a) Any person of full age and capacity:
  
  • (i) Who is a citizen of another country, but was a citizen of India at the time of, or at any time after, the commencement of the constitution, or (ii) Who is a citizen of another country, but was eligible to become a citizen of India at the time of the commencement of the constitution, or (iii) Who is a citizen of another country, but belongs to a territory that became part of India after the 15th Day of August, 1947. (iv) Who is a child of such a citizen, or
  • (b) A person, who is minor child of a person mentioned in clause (a)

           Provided that no person, who is or had been a citizen of Pakistan, Bangladesh shall be eligible for registration as an

          Overseas Citizen of India.

          Documents required for buying property

• – Pan card (Permanent account number)
• – OCI/PIO card (In case of OCI/PIO)
• – Passport (In case of NRI)
• – Passport size photographs
• – Address proof

 

• Who can purchase immovable property in India?
  
  Under the general permission granted by RBI, the following categories can freely purchase immovable property in India:
  
  (a) Non-Resident Indian (NRI)- that is a citizen of India residing outside India
  
  (i) Person of Indian Origin (PIO)- that is an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan), who at any time, held Indian passport or
  
  (ii) who or either of whose father or whose grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).
  
  The general permission, however, covers only purchase of residential and commercial property and not for purchase of agricultural land/plantation property/farm house in India. OCI can purchase immovable property in India except agricultural land/plantation property/farmhouse.
• Can an NRI/foreign national acquire immovable residential property in India?
  
  Acquisition by purchase:
  
  Yes, under general permission granted by the RBI an NRI/PIO can purchase a residential property in India
  
  Acquisition by gift:
  
  Yes, under general permission granted by the RBI an NRI/PIO can acquire a residential property by way of gift from a person in India or an NRI or a PIO.
  
  Acquisition by inheritance:
  
  Yes, an NRI/PIO/foreign national of Indian origin can acquire residential property by way of inheritance from a person who is a resident of India as per the Provisions of Section 6(5) of the Foreign Exchange Management Act, 1999. An NRI/PIO/ foreign national of Indian origin can also acquire residential property by way of inheritance from a person who is a resident outside of India, with specific approval of Reserve Bank, provided the bequeathor had acquired such property in accordance with the provisions of foreign exchange law in force at the time of acquisition or under FEMA regulations.
• Do non-resident Indian citizens require permission of Reserve Bank to acquire residential/commercial property in India?
  
  Answer: No
  
  
• Is It true that foreign citizens of Indian origin require permission of Reserve Bank to purchase immovable property in India for their residential use?
  
  Answer: Yes. However, 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 separate permission of Reserve Bank
  
  
• How should the purchase consideration for the residential immovable property be paid by foreign citizens of Indian origin under the general permission?
  
  Answer: The purchase consideration should be met either out of inward remittances in foreign exchange through normal banking channels or out of funds from NTE/FCNR accounts maintained with banks in India.
  
  
• While purchasing residential immovable property in India under the general permission, what are the formalities to be completed by a foreign citizen of Indian origin and whether they are allowed to sell it further without the permission of Reserve Bank?
  
  Answer: 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. 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.
  
  
• Can sale proceeds of such property if and when sold be remitted out of India?
  
  Answer: 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.
  
  
• What are the conditions to be fulfilled if repatriation of sale proceeds is desired? What is the procedure for seeking such repatriation?
  
  Answer: 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. 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.
• Can foreign citizens of Indian origin acquire or dispose of residential property by way of gift?
  
  Answer: 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, provided gift tax has been paid.
  
  
• Are they allowed to acquire and dispose of commercial properties in India? Can sale proceeds of such property be remitted out of India?
  
  Answer: Yes, They can dispose of such property. 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 installments 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 info.

• Can the properties (residential/commercial) be given on rent if not required for immediate use
  
  Answer: Yes. Reserve Bank has granted general permission for letting out of any immovable property in India. The rental income or proceeds of any investment of such income has to be credited to NRO account.

• Can NRIs obtain loans for acquisition of a house/flat for residential purpose from financial institutions providing housing finance? Are there any authorized housing loan dealers, which can grant loan to NRIs acquisition of a flat/house for residential purposes?
  
  Answer: Reserve Bank has granted general permission to certain financial institutions providing housing finance e.g. HDFC,LIC Housing Finance Ltd.,etc. to grant housing loans to non-resident Indian nationals for acquisition of houses/flats for self-occupation subject to certain conditions. Authorized housing loan dealers have been granted permission to grant loans up to non-resident Indian nationals for acquisition of house/flat for self-occupation on their return to India subject to certain conditions. Repayment of the loan should be made within a period not exceeding 15 years out of inward remittance through banking channels or out of funds held in the investments’ NRE/FCNR accounts.

• What are the options available for obtaining guarantors while applying for a HDFC/LIC loan?
  
  Answer: One will need a guarantor for a loan mainly for collateral security. The guarantor will have to demonstrate appropriate net worth to cover for the loan. Usually one can have a guarantor in any city where the loan issuer has a branch. Talk to loan issuers they will work something out for NRIs and foreign banks.

• Is there any way to avoid Power of Attorney demanded by the developers in their favour at the time of purchase?
  
  Answer: One can choose not to grant the Power of Attorney (POA) to the developers. However this will mandate the mailing of all documents to your foreign residence and associated time delays. A good compromise is to grant the POA to the builder only for specific necessary items.

• Can a PIO transfer by way of sale his residential/commercial property to NRI or a PIO?
  
  Answer: No. He would need to seek Reserve Bank prior approval for transfer by way of sale residential/commercial property in India to a NRI or a PIO But he can sell it to a person who is resident of India.

• Is NRI/PIO who has purchased residential/commercial property under general permission required to file any documents with Reserve Bank of India? Are there any restrictions on the number of such property that he can purchase under general permission available?
  
  Answer: NRI/PIO who has purchased residential/commercial property under general permission is not required to file any documents with the Reserve Bank. There is no restriction on number of residential/commercial property that NRI/PIO can purchase under the general permission available.
  
  
• Can a foreign national of non-Indian origin resident outside India acquire any immovable property in India by way of purchase? Can they have the property on lease?
  
  Answer: No. Under section 2 (ze) of the Foreign Exchange Management Act, 1999 ‘transfer’ includes among others, ‘purchase’. Therefore, a foreign national of non-Indian origin resident outside India cannot acquire any immovable property in India by way of purchase but any foreign National of non-Indian origin including a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan may acquire only residential accommodation on lease, not exceeding five years for which he/she does not require prior permission of Reserve Bank of India.
  
  
• Can a person resident outside India (i.e. a NRI or a PIO or a foreign national of non-Indian origin) acquire agricultural land/plantation property/farm house in India by way of purchase?
  
  Answer: No. A person resident outside India cannot acquire by way of purchase agricultural land/plantation property/farm house in India.

• Under general permission available to whom can NRI transfer by way of sale his residential/commercial property?
  
  Answer: NRI can transfer by way of sale residential/commercial property in India to a person resident in India or to a NRI or a PIO.

• Can a PIO transfers by way of sale his residential/commercial property to a NRI or a PIO?
  
  Answer: No. He would need to seek Reserve Bank prior approval for transfer by way of sale residential/commercial property in India to a NRI or a PIO.

What is the Tax treatment for income generated from property selling or renting for NRI/ PIO/OCI? 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 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.

Do NRI/PIO/OCI have to file return in India for their property rental income and Capital Gains Tax?

The Government of India has granted general permission for NRI/PIO/OCI to buy property in India and they do not have to pay any taxes even while acquiring property in India. However, taxes have to be paid if they are selling this property. Rental income earned is taxable in India, and they will have to obtain a PAN and file return of income if they have rented this property. On sale of the property, the profit on sale shall be subject to capital gains. If they have held the property for less than or equal to 3 years after taking actual possession then the gains would be short term capital gains, which are to be included in their total income as tax as per the normal slab rates shall be payable and if the property has been held for more then 3 years then the resultant gain would be long term capital gains subject to 20% tax plus applicable cess.

How does the Double Taxation Avoidance Agreement work in the context of tax on income and Capital Gains tax paid in India by NRI?

India has DTAA’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 DTAA with most countries provide that the capital gains will be taxed in the country where the immovable property is situated. Hence, the non-resident will be subject to tax in India on the capital gains which arise on the sale of immovable 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.

Does Capital Gains Tax (CGT) apply to NRI/PIO/OCI ?

Yes. Long-term and short-term capital gains are taxable in the hands of non-residents.

How is Rate of CGT computed?

Type of asset: Assets like house property, land and building, jewellery, development rights etc.Rate of tax deduction at source (TDS)

Exemption available (only for long term capital gains)
The long term capital gains arising on sale of a residential house can be invested in buying/ constructing another residential house, within the prescribed time. The exemption is restricted to the amount of capital gains or amount invested in new residential house, whichever is lower. If the amount of capital gains is invested in bonds of National Highways Authority of India (NHAI) or Rural Electrification Corporation, then the entire capital gains is exempted, else the proportionate gain is exempted. As per the financial budget 2007-08, a cap of Rs. 50 lakhs has been imposed on investment that can be made in capital tax saving bonds.

How does Double Taxation Avoidance Agreement work in the context of CGT paid in India on the foreign tax treatment?

In case the non-resident pays any tax 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 DTAA and is also dependent on the laws of the home country where the tax payer is a tax resident.

Long term	Short term
20.6%	30.9%

What are the rules governing the repatriation of the proceeds of sale of immovable properties by NRI/PIO as prescribed by the Reserve Bank of India?

If the property was acquired out of foreign exchange sources i.e. remitted through normal banking channels/by debit to NRE/FCNR(B) account, the amount to be repatriated should not exceed the amount paid for the property:(i) In foreign exchange received through normal banking channel or
(ii) By debit to NRE account (foreign currency equivalent, as on the date of payment) or debit to FCNR(B) account.

Repatriation of sale proceeds of residential property purchased by NRI’s/PIO’s out of foreign exchange is restricted to not more than two such properties. Capital gains, if any, may be credited to the NRO account from where the NRI’s/PIO’s may repatriate an account up to USD one million, per financial year, as discussed below.

If the property was acquired out of Rupee sources, NRI/PIO may remit an amount up to USD one million, per financial year, out of the balances held in the NRO account (inclusive of sale proceeds of assets acquired by way of inheritance or settlement), for all the bonafide purposes to the satisfaction of the Authorized Dealer bank and subject to tax compliance. The NRI/PIO may use this facility to remit capital gains, where the acquisition of the subject property was made by funds sourced by remittance through normal banking channels/by debit to NRE/FCNR(B) account.

Can NRI / PIO repatriate outside India the sale proceeds of immovable property held in India?

(a) In the event of sale of immovable property other than agricultural land / farm house / plantation property in India by a NRI / PIO, the Authorised Dealer may allow repatriation of the sale proceeds outside India, provided the following conditions are satisfied, namely:(i) 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;

(ii) the amount to be repatriated does not exceed:
• the amount paid for acquisition of the immovable property in foreign exchange received through normal banking channels, or
• the amount paid out of funds held in Foreign Currency Non-Resident Account, or
• 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; and
(iii) in the case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties.

For this purpose, repatriation outside India means the buying or drawing of foreign exchange from an authorised dealer in India and remitting it outside India through normal banking channels or crediting it to an account denominated in foreign currency or to an account in Indian currency maintained with an authorised dealer from which it can be converted in foreign currency.

(b) in case the property is acquired out of Rupee resources and/or the loan is repaid by close relatives in India (as defined in Section 6 of the Companies Act, 1956), the amount can be credited to the NRO account of the NRI/PIO. The amount of capital gains, if any, arising out of sale of the property can also be credited to the NRO account. NRI/PIO are also allowed by the Authorised Dealers to repatriate an amount up to USD 1 million per financial year out of the balance in the NRO account / sale proceeds of assets by way of purchase / the assets in India acquired by him by way of inheritance / legacy. This is subject to production of documentary evidence in support of acquisition, inheritance or legacy of assets by the remitter, and a tax clearance / no objection certificate from the Income Tax Authority for the remittance. Remittances exceeding US $ 1,000,000 (US Dollar One million only) in any financial year requires prior permission of the Reserve Bank.

(b) A person referred to in sub-section (5) of Section 6 of the Foreign Exchange Management Act 3[3] [3], 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.

Is the rental income from property repatriable and what are the RBI rules?

The rental income, being a 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.

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 instalment of consideration amount, whichever is later.

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.

What is POA?

A Power Of Attorney (POA) or letter of attorney is a written authorization to represent or act on another’s behalf in private affairs, business, or some other legal matter, sometimes against the wishes of the other. The person authorizing the other to act is the principal, grantor, or donor (of the power).A Power Of Attorney is not an instrument of transfer in regard to any right, title or interest in an immovable property.
A Power Of Attorney, or letter of attorney, is a document that authorizes another person, known as the agent or attorney-in-fact—usually a legally competent relative or close friend over 18 years old—to handle any combination of financial, legal and health care decisions. A power of attorney is also referred to as a POA. Generally, one chooses a POA as a provision if he or she becomes incapacitated.

Types of Power of Attorney

A Power Of Attorney (POA) is an instrument that is used by people to confer authority on somebody else to legally act on their behalf. POA are of two types.Special Power of Attorney (SPA), while an SPA is used for transfer of a specific right to the person on whom it is conferred.

• General Power of Attorney (GPA), the GPA authorizes the holder to do whatever is necessary.
• There is no sale clause of immovable property mentioned in POA (notarized)
• Registered POA from registration office allows sale clause and POA to any one
• Following are the important things to be kept in mind while executing the POA
• Customer Prepares POA as per defined format.Executants has to paste his/her photograph along with signature on each page.
• Authenticate/adjudicate the POA from Indian Embassy or local authority.
• Send authenticated/adjudicated POA in India.

In India, the POA holder has to paste his/her photograph along with his/her left hand thumb impression and signature.
Then this document will have to be stamped for Rs. 500/- (ESBTR, Franking, Stamp paper) and notarised from a Registered Notary. Please ensure that a stamp of “Before Me” is affixed on the document.