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NRI Realty Investment Norms Eased


   The rights and entitlements as well as the limitations and restrictions on the acquisition, holding and transfering of immovable property in India by a Non-Resident Indian (NRI) or Person of Indian Origin (PIO) have been much simplified.


   NRIs and PIOs are permitted to purchase residential and commercial property in India without seeking any prior permission and without any limitations on the number or size of such properties. When purchasing a residential/commercial property, an NRI/PIO can make requisite payments only from funds that have been remitted to India through normal banking channels or from funds held in an NRE/NRO/FCNR (B) account maintained in India. They are not permitted to make payments against such purchase in foreign currency or by traveller's cheques or any other mode except those specified by the RBI.


   However, NRIs/PIOs wishing to purchase agricultural land/plantation property/farmhouse in India have to seek the specific permission of the Reserve Bank of India (RBI) which considers such proposals in consultation with the government of India. Where a person has acquired agricultural land/ plantation property/farmhouse when he was a resident in India, such person may continue to hold these properties even after becoming an NRI/PIO without the approval of RBI.


   Further, NRIs and PIOs may acquire residential and commercial property (not being agricultural land/ plantation property/farmhouse) by way of gift from a person resident in India or another NRI/PIO. NRIs and PIOs can acquire by way of inheritance any immovable property in India, including agricultural land/plantation property/farmhouse. It is crucial that the person from whom the property is inherited (who could be a person resident in India or person resident outside India) should have acquired such property in accordance with the provisions of foreign exchange law in force or FEMA regulations.


   A citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan is not permitted to acquire / transfer any immoveable property in India (except by way of lease for less than five years) without prior permission from RBI.


   Holding immovable property


   NRIs and PIOs do not require any prior approval for leasing / renting out residential/commercial properties owned by them (irrespective of whether such property is purchased from rupee/foreign exchange funds). The rental money received can either be credited to an NRO/NRE account or remitted abroad. If current income such as rental income, pension, interest, etc. is being remitted abroad, NRIs and PIOs need appropriate certification by a qualified chartered accountant, certifying that the amount proposed to be remitted is eligible for being remitted and applicable taxes on it have been paid for.

TRANSFERRING IMMOVABLE PROPERTY    

The restrictions and prescriptions on transfer of immovable property by a PIO/NRI differ with respect to the nature of immovable property being transferred and mode of transfer viz. sale and gift. (See table)

OUTWARD REMITTANCES

Outward remittances by NRIs and PIOs of proceeds obtained from selling their property in India are also regulated. The immovable property being sold should have been acquired as per provisions of applicable foreign exchange law in force at the time of its acquisition. Secondly, the amount to be repatriated should not exceed the amount that was paid for acquiring such property.


   If the property was bought out of Rupee sources and its sale proceeds deposited in an NRO account, NRIs and PIOs may repatriate an amount of up to US$ 1 million per financial year out of the balances held in such NRO account, for bonafide purposes, subject to satisfying the authorised dealer bank and compliance with taxes. In the event the property being sold was acquired by way of gift/inheritance from a person resident in India, the sale proceeds should be credited to an NRO account only. Upon production of valid documentary evidence supporting such gifting/inheritance of property along with tax clearance certificate, NRIs and PIOs may repatriate an amount of up to US$ 1 million per financial year out of the balances held in such NRO account, subject to the satisfying the authorised dealer bank. Also, remittances exceeding US$ 1 million per financial year requires prior permission of RBI. On the other hand, if the property being sold was acquired out of foreign exchange sources, the amount that can be repatriated should not exceed the amount that was paid for it in foreign exchange received through normal banking channels. Here, it is important to note that sale proceeds from only a maximum of two residential properties can be repatriated. When contemplating purchasing or selling property, NRIs and PIOs must refer to the latest guidelines released by the RBI from time to time. Carrying out transactions in accordance with prevalent laws undoubtedly helps minimise chances of property and tax litigation in the future.

 


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