Tips in property deals for NRIs

Tips in Property Deals for NRIs An erroneous decision while buying land in India may result in a financial setback to an NRI. There is need to understand the legal position. You have secured gainful employment abroad. You may be an NRI or PIO. You may want to take care of your parents. You may want to invest for your spouse or children. You may have plans of resettling in India. Investment in real estate in India appears to be a good option in all the above situations. There is a mix of enthusiasm, fear and expectations; a play of other emotions. An erroneous decision may result in a financial setback. There is a need to understand the legal position. Immovable property As a non-resident Indian, you may acquire any immovable property in India other than agricultural / plantation / farmhouse. You are also permitted to transfer any immovable property in India to a person resident in India. Further, you may transfer any immovable property other than agricultural or plantation property or farm house to a person resident outside India who is a citizen of India or to a person of Indian origin resident outside India. As a Person of Indian Origin (PIO) resident outside India, you may acquire any immovable property other than agricultural land / farm house / plantation property in India by purchase, from out of funds received in India by way of inward remittance from any place outside, India or funds held in any non-resident account maintained in accordance with the Foreign Exchange Management Act, 1999 and the regulations made by the Reserve Bank of India under the Act. A person of Indian origin may also acquire any immovable property other than agricultural land / farm house / plantation property in India by way of gift from a person resident in India or from a person resident outside India who is a citizen of India or from a person of Indian origin resident outside India. You may acquire any immovable property in India by way of inheritance from a person resident outside India who had acquired such property 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 or from a person resident in India. A person of Indian origin may transfer any immovable property in India other than agricultural land / farmhouse / plantation property, by way of sale to a person resident in India. A person of Indian origin may transfer agricultural land / farmhouse / plantation property in India, by way of gift or sale to a person resident in India who is a citizen of India. A person of Indian origin may transfer residential or commercial property in India by way of gift to a person resident in India or to a person resident outside India who is a citizen of India or to a person of Indian origin resident outside India. A person resident outside India who has established in India in accordance with the Foreign Exchange Management (Establishment of India of Branch or Office or other Place of Business) Regulations 2000, a branch, office or other place of business for carrying on in India any activity, excluding a liaison office may acquire any immovable property in India, which is necessary for or incidental to carry on such activity. For such purpose, all applicable laws, rules, regulations and directives in force should have been duly complied with and the person concerned should file with the Reserve Bank of India a declaration in the prescribed format not later than 90 days from date of such acquisition. Such a person can also mortgage the property as a security for acquisition of immovable property in the above aforesaid manner. Sale proceeds Insofar as repatriation of sale proceeds is concerned, such repatriation in respect of properties acquired by the person while being a resident of India or acquired by inheritance from a person who is resident of India, can only be effected with the prior permission of the Reserve Bank of India. In the event of sale of properties other than agricultural land / farm house / plantation property in India by a person resident outside India who is a citizen of India or a person of Indian origin, the authorised dealer may allow repatriation of sale proceeds outside India subject to the condition that the immovable property was acquired by the seller in accordance with the provisions of foreign exchange law in force at the time of acquisition or the provisions of FEMA and the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations 2000 and 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 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 is Non- Resident External Account for the acquisition of the property concerned. Repatriation can be made for a maximum of two residential properties. No permission for renting In the event that there is no repatriation of sale proceeds, no permission is required for renting, transfer or gift of the properties. Rents received by NRIs may be credited to the Ordinary Non-Resident (NRO) account and allowed to be remitted abroad. In the event that the NRI concerned is not maintaining an NRO account in India, remittance of rental income may be allowed by an authorised dealer after obtaining necessary certificate from a Chartered Accountant and allocating necessary amount for payment of taxes. If the income for the NRI is less than taxable limits, then the NRI concerned has to file a declaration in the prescribed format for obtaining remittance of such rental income. RBI okay for farmland In the event that you desire to purchase any agricultural land / plantation property / farm house, then prior permission has to be obtained from the Reserve Bank of India. There are certain restrictions for purchase or transfer of immovable property for citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan. A citizen of the above countries cannot acquire or transfer any immovable property in India, without prior permission of Reserve Bank of India. Such permission need not be obtained if the transaction involves a lease of property for a term of five years and less. All property transactions by NRIs and persons of Indian origin shall be governed by the relevant provisions of FEMA and the various regulations made thereunder including the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations 2000. These are broad guidelines and at times, difficult to understand. Hence, please take necessary professional guidance prior to taking any major decisions on purchase of immovable property in India. Courtesy: Property Plus, The Hindu.