NRI Services

 

NRI  Guide To Property Investment In India

 

How can NRIs invest in real estate?

According to the regulations of FEMA and RBI, an NRI is permitted to make specific investment in real estate. A NRI is allowed to do the following investments in property:

1. Any immovable property can be purchased by an NRI in India other than any agricultural land, farm house and plantation property.

2. He can get any immovable property as mentioned above by gift from Indian resident, Indian citizen residing outside India or person of Indian origin.

3. Obtain any property by inheritance.

4. He can transfer immovable property to any resident of India by sale.

5. He can transfer any agricultural land, farm house or plantation land to any resident of India by gift.

6. He can also transfer his residential or commercial property by means of gift to any person either residing in India or abroad or person of Indian origin.

Sources of finance:

NRI’s consider financial institutions as an easy option available in India for purchasing any property. At the same time financial institutions consider NRI’s as their potential clients. Financial institutions provide home loans easily, efficiently and sooner to such people as they are very much prompt at the time of repayment. Furthermore, the repayment can readily be done by inward remittance through the proper banking channel. If someone is already getting income in India from sources like rent or dividend, he/she can directly repay the loan as well.

Now RBI has also predetermined these norms in home loans for non-residents who are looking forward to buying any property:

1. A maximum of 80 per cent amount is financed by the financial institution. The rest should be given by the NRI.

2. The remittance of the amount for down payment can be done from the place of residence by normal banking channels, i.e., NRO/NRE account in India.

3. The NRI has to repay his principal amount as well as interest part from that similar channel only.

Tax implications for NRI’s looking for property in India:

An NRI has to shell out stamp duty as well as registration fees at the time of purchase. He is entitled to avail all sorts of benefits at par with Indian residents on the interest paid for the home loan. However, the tax process becomes full of twists and turns if the property is leased.

As the amount of income received from such action comes under the head of income from property, therefore, standard deduction is applicable as per the standard slab. In this case, the NRI will have to pay the applicable tax if he is residing in the country where worldwide income is taxable unless the country has Double Tax Avoidance Agreement with India.

The special advantage for an NRI is the amount which is paid for the interest of home loan is deductible from NRI's taxable income without any upper limit. The NRI is legally responsible for the payment ofCapital Gains Tax as prescribed under the Income Tax Act, in case he sells off the property.

Points to be considered at the time of purchase:
 

Investment in real estate is a simple move but there are several drawbacks as well. So, one should be cautious enough at the time of purchase to secure the deal.

Few points of consideration are under:

Property name: The name of property should be clear from issues and the seller should have the required right to sell it, especially if it is inherited or any joint property.

NOC: Always check that there will be no outstanding electricity/water bills or any other authority dues pending with the property. Take a no dues certificate from the seller / Society  at time of purchase.

Bank release letter: It is advisable to take the bank release letter from the concerned bank, if the property had been mortgaged as security in any type of loan.
 

NRI (Non Resident Indian)  and  PIO  (Person Of Indian Origin)
 

The general requirements to obtain a PIO card include holding an Indian passport at any time, one’s parents, grandparents or great grandparents being born in India or permanent residents of India, or spouse being a citizen of India or PIO card holder. Citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan may not hold PIO cards. For more information and a detailed list of requirements, please visit http://www.immigrationindia.nic.in/pio_card.htm.

An Indian citizen resident outside India or a PIO does not require any special permission to buy immovable property in India.

However, no payment of the purchase price can be made in foreign currency. The buyer make the purchase in rupees through funds received in India through normal banking channels, or funds maintained in any non-resident account under FEMA and RBI regulations.

There are also no restrictions on the number of immovable properties an NRI or a PIO may purchase for either residential or commercial purposes.
 

Foreign Citizens
 

A foreign nationalresident outside India cannot buy immovable property in India.

However, foreign nationals who are resident in India (and who are not citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, or Bhutan) can purchase immovable property in India without any special approval from the RBI.

However such buyers should check with their lawyers before buying any property as they might require approvals from other authorities such as the State Government, etc.
 

To be considered a resident of India under FEMA, a foreign national would have to satisfy two conditions :
 

He/she must be residing in India for more than 182 days during the preceding financial year, and His/her continued presence in India in the current financial year must be for the purpose of taking up employment, carrying on business or vocation in India or for any other purpose that would indicate your intention to stay in India for an uncertain period.

Both conditions must necessarily be fulfilled for a foreign national to be considered a resident of India under FEMA.

Citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, or Bhutan who are resident in India can only purchase immovable property in India with the prior permission of the RBI, who will consider the request in consultation with the Government of India.

For more information, please visit http://www.rbi.org.in
 

In the following circumstances, the NRI/PIO may repatriate a maximum of USD one million per financial year:
 

Out of the balances held in the NRO account if the property was purchased out of rupee sources.

If the property was acquired by way of gift, the sale proceeds must be credited to an NRO account, and thereafter may be repatriated.

If the property was inherited from a person resident in India, it may be repatriated on production of documentary evidence proving inheritance, an undertaking by the NRI/PIO, and a certificate by a Chartered Accountant in the formats prescribed by the Central Board of Direct Taxes.

In the case of residential property, repatriation of sale proceeds is restricted to not more than two such properties.

A foreign national may repatriate sale proceeds even if the property was inherited from a person outside India. However, prior approval of the RBI must be obtained.

A citizen of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan and Iran must seek specific approval from the RBI for repatriation of sale proceeds.

For more and updated information, please visit http://www.rbi.org.in

REPATRIATION OF SALE PROCEEDS OF PROPERTY SOLD IN INDIA. 

How to transfer money from property sale in India to overseas bank account.

 

Repatriation of the sale proceeds is allowed if:

1. The property is sold at least three years after acquisition.

2. The property was acquired in accordance with the provisions of foreign exchange laws in force when the property was purchased.

3. The amount that can be repatriated will be up to the amount submitted in foreign exchange through normal banking channels when the property was purchased.

4. In case the properties that are sold are residential properties. Then repatriation is allowed only twice.

5. A certificate in the prescribed format may be required from a CA to confirm that the money indeed deposited in the NRO account is from the sale proceeds of legally owned property. It is therefore of utmost importance that NRI’s when they sell property in India to accept payment 

only via legal banking channels. Accepting cash payments is certainly not recommended in India. NRI’s/ PIO’s are allowed to repatriate an amount up to USD one million, per financial year (April-March), out of the balances held in the Non-Resident (Ordinary) Rupee (NRO) account, subject to compliance with applicable tax requirements.
 

Transferring Money from India from sale of inherited property
 

NRI’s or PIO’s who inherit property from a person resident in India and sell it, can transfer the sale proceeds abroad. Up to one million US Dollars per calendar year subject to production of documentary evidence to support their inheritance of the property and the necessary tax clearance certificates from the appropriate income tax authority. 
 

NRIs Renting Property in India - Types of rental agreements in India. 
 

Many NRI’s and PIO’s purchase properties in India as an investment and perhaps with the goal of probably returning to India at some point of time. Instead of keeping properties vacant, renting out is an option that some people consider. Rents in the major cities have gone up in the last few years and it does make good economic sense to rent out vacant properties. However, many people shy away from renting as they have are worried about tenants may not vacate the premises. While there are no full proof methods of protecting landlords in India from tenants who refuse to vacate their property after their rental agreements have expired, there are some steps landlords can take to protect themselves and their property. Landlords, can protect themselves from undesirable tenants, to some extent by using a leave and license agreement when renting out their property.
 

There are normally two types of agreements that are used when renting the property.
 

1.            RENTAL LEASE AGREEMENT            2.   LEAVE AND LICENCE AGREEMENT.

While both these types of agreements appear to be similar with the purpose of renting property, there is a considerable difference when legal aspects are taken into consideration. In simple terms, in rental lease agreements, there is, considered to be a transfer of interest from a lessor to a lessee. On the other hand a Leave and License agreement does not create any interest in the premises in favor of the licensee. Leave and license agreements offer a higher form of protection for landlords against tenants. In general, rent control laws do not apply to leave and license agreements. Eviction, under leave and license is governed by the Easements Act. NRI’s and PIO’s who wish to rent out their properties should consider using a Leave and License agreement. 

 

“ T.D.S. ” Need To Be Deducted On Purchase Of Property From NRI  ......Click here 

 

Disclaimer : The above information is indicative only, all the website users to verify the information from , http://www.rbi.org.in, before use.