FAQs ON FOREIGN (NRI & PIO) INVESTMENTS IN REAL ESTATE IN INDIA
A Non Resident Indian (NRI) is a person of Indian origin but not residing in India.
According to an estimate, over 25 million Non Resident Indians are looking homewards for potential investment opportunities in real estate. The foreign direct investment under automated route in real estate development has also boosted the confidence of Indians abroad to forge alliances with global realty giants for testing select markets across the country.
Under the Foreign Exchange Management Act, 1999, commonly known as the FEMA, the Reserve Bank of India is empowered to frame rules and regulations to prohibit, restrict or regulate the acquisition or transfer of immovable property in India by certain persons mainly residing out of India. The restrictions contained therein are however, not applicable to a lease of immovable property for a period less than five years.
The regulations made by the Reserve Bank are called Foreign Management (Acquisition and Transfer of Immovable Property in India) regulations, 2000, the full text of the said provisions are available on the bank’s website.
(1) Under the present regulations only a person who is citizen of India (an NRI) or a person who is of Indian origin (a PIO) can purchase only a residential or a commercial property in India.
(2) For the purpose of acquisition and transfer of immovable property in India, a PIO 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 (i) at any time, held Indian passport, or (ii) who or either of whose father or grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).
(3) An NRI or PIO who has purchased any residential/commercial property under the General permission is not required to file any documents with the Reserve Bank of India.
(4) There is no restriction on the number of residential or commercial properties that NRI/PIO can purchase under the general permission available.
(5) Under Section 2 (zed) 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.
(6) A Foreign National of anon-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 or she does not require prior permission of Reserve Bank of India.
(7) A person resident outside India cannot acquire by way of purchase agricultural land/plantation property or farmhouse in India.
(8) Under the general permission available NRI or PIO may acquire residential or commercial property by way of gift from a person resident in India or a NRI or a PIO..
(9) Under Section 2 (ze) of the Foreign Exchange Management Act, 1999 ‘transfer’ includes among others, ‘gift’. Therefore, a foreign national of non-Indian origin resident outside India cannot acquire residential or commercial property in India by way of gift.
(10) A foreign national of non-Indian origin whether resident in India or outside India would need to seek prior approval of Reserve Bank for transfer by way of sale residential property in India acquire with specific permission of Reserve Bank to a person resident in India or outside India.
(11) Under the general permission available NRI or PIO may transfer by way of sale his agricultural land or plantation property or farm house in India to a person resident in India who is a citizen of India.
(12) NRI or PIO may transfer by way of gift residential or commercial property in India to a person resident in India or to a NRI or a PIO.
GENERAL INFORMATION REGARDING REAL ESTATE:
» 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.
» 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.
» 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.
» The lock-in period of 3 years has been done away with.
» If property has been acquired through NRE account then repatriation is allowed only for 2 residential properties.
» 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.
» 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.
» Sale proceeds of residential/commercial property received by way of gift by NRI/PIO can only be credited to NRO account.
» 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.
» NRI/PIO can rent out the residential/commercial property purchased out of foreign exchange/rupee funds.
» 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.
» 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.
» 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
» No taxes to be paid while purchasing property.
» 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.
» At the time of renting out property or repatriation PAN card is required.
A Non Resident Indian (NRI) is a person of Indian origin but not residing in India.
According to an estimate, over 25 million Non Resident Indians are looking homewards for potential investment opportunities in real estate. The foreign direct investment under automated route in real estate development has also boosted the confidence of Indians abroad to forge alliances with global realty giants for testing select markets across the country.
Under the Foreign Exchange Management Act, 1999, commonly known as the FEMA, the Reserve Bank of India is empowered to frame rules and regulations to prohibit, restrict or regulate the acquisition or transfer of immovable property in India by certain persons mainly residing out of India. The restrictions contained therein are however, not applicable to a lease of immovable property for a period less than five years.
The regulations made by the Reserve Bank are called Foreign Management (Acquisition and Transfer of Immovable Property in India) regulations, 2000, the full text of the said provisions are available on the bank’s website.
(1) Under the present regulations only a person who is citizen of India (an NRI) or a person who is of Indian origin (a PIO) can purchase only a residential or a commercial property in India.
(2) For the purpose of acquisition and transfer of immovable property in India, a PIO 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 (i) at any time, held Indian passport, or (ii) who or either of whose father or grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).
(3) An NRI or PIO who has purchased any residential/commercial property under the General permission is not required to file any documents with the Reserve Bank of India.
(4) There is no restriction on the number of residential or commercial properties that NRI/PIO can purchase under the general permission available.
(5) Under Section 2 (zed) 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.
(6) A Foreign National of anon-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 or she does not require prior permission of Reserve Bank of India.
(7) A person resident outside India cannot acquire by way of purchase agricultural land/plantation property or farmhouse in India.
(8) Under the general permission available NRI or PIO may acquire residential or commercial property by way of gift from a person resident in India or a NRI or a PIO..
(9) Under Section 2 (ze) of the Foreign Exchange Management Act, 1999 ‘transfer’ includes among others, ‘gift’. Therefore, a foreign national of non-Indian origin resident outside India cannot acquire residential or commercial property in India by way of gift.
(10) A foreign national of non-Indian origin whether resident in India or outside India would need to seek prior approval of Reserve Bank for transfer by way of sale residential property in India acquire with specific permission of Reserve Bank to a person resident in India or outside India.
(11) Under the general permission available NRI or PIO may transfer by way of sale his agricultural land or plantation property or farm house in India to a person resident in India who is a citizen of India.
(12) NRI or PIO may transfer by way of gift residential or commercial property in India to a person resident in India or to a NRI or a PIO.
GENERAL INFORMATION REGARDING REAL ESTATE:
» 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.
» 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.
» The lock-in period of 3 years has been done away with.
» If property has been acquired through NRE account then repatriation is allowed only for 2 residential properties.
» 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.
» 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.
» Sale proceeds of residential/commercial property received by way of gift by NRI/PIO can only be credited to NRO account.
» 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.
» NRI/PIO can rent out the residential/commercial property purchased out of foreign exchange/rupee funds.
» 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.
» 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.
» 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
» No taxes to be paid while purchasing property.
» 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.
» At the time of renting out property or repatriation PAN card is required.
No comments:
Post a Comment