Frequently Asked Questions (FAQs):
The following are frequently asked questions relating to the purchase and transfer of immovable property in India by a person resident outside India under the provisions of FEMA, 1999.
- What is the definition of NRIs/PIOs?
- What are the types of properties that can be bought by NRIs/PIOs?
- Do any documents need to be filed with Reserve Bank of India after purchase?
- How many residential/commercial properties can NRIs/PIOs purchase under the general permission?
- Can a foreign national of non Indian origin resident outside India purchase immovable property in India?
- Can a foreign national who is a resident of India purchase immovable property in India?
- Can an office of a foreign company purchase immovable property in India?
- Can a non-resident inherit immovable property in India?
- From whom can the non-resident inherit immovable property?
- Can a NRI/PIO repatriate the sale proceeds of immovable property? If so, what are the terms?
- Can a NRI/PIO repatriate the proceeds in case the sale proceed was deposited in NRO account?
WHO IS A NRI?
A Non Resident Indian (NRI) is a person of Indian origin but not residing in India.
Under the Income Tax Act to be assessed as a "resident", an individual should fulfill either of the two conditions:
- He should have been present in India in the previous year for at least 182 days. This period of 182 days need not be continuous.
- He should have been in India for at least 365 days in the preceding four years and he stayed in India for not less than 60 days in the previous year in consideration.
WHO IS A PIO?
For the purpose of transfer of immovable property a Person of Indian Origin (PIO) origin 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 fulfils any of the conditions given below:
- He has held an Indian passport; or
- He or either of his parents or any of his grand-parents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955); or
- The person is a spouse of an Indian citizen or a person referred to in sub-clause (a) or (b).
Under the general permission available NRIs and PIOs can freely purchase immovable property in India. However the general permission covers only purchase of residential and commercial property and not for purchase of agricultural land/plantation property/farm house in India.
No. An NRI/PIO who has purchased residential/commercial property under general permission is not required to file any documents with the Reserve Bank.
There are no restrictions on the number of residential/commercial properties that can be purchased.
No. A foreign national of non Indian origin, resident outside India cannot purchase any immovable property in India. But, he/she may take residential accommodation on lease provided the period of lease does not exceed five years. In such cases, there is no requirement of taking any permission of or reporting to Reserve Bank.
Yes, but the person concerned would have to obtain the approvals, and fulfil the requirements if any prescribed by other authorities, such as the concerned state government, etc. However, a foreign national resident in India who is a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan would require prior approval of Reserve Bank. Such requests are considered by Reserve Bank in consultation with the Government of India.
A foreign company which has established a Branch Office or other place of business in India, in accordance with FERA / FEMA regulations, can acquire any immovable property in India, which is necessary for or incidental to carrying on such activity. The payment for acquiring such a property should be made by way of foreign inward remittance through proper banking channel. A declaration in form IPI should be filed with Reserve Bank within ninety days from the date of acquiring the property. Such a property can also be mortgaged with an Authorised Dealer as a security for other borrowings. On winding up of the business, the sale proceeds of such property can be repatriated only with the prior approval of Reserve Bank. Further, acquisition of immovable property by entities who had set up Branch Offices in India and incorporated in Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan would require prior approval of Reserve Bank to acquire such immovable property. However, if the foreign company has established a Liaison Office, it cannot acquire immovable property. In such cases, Liaison offices, can take property by way of lease not exceeding 5 years.
Yes, a person resident outside India i.e.
i) a NRI
ii) a PIO and
iii) a foreign national of non-Indian origin can inherit and hold immovable property in India from a person who was resident in India. However, a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan should seek specific approval of Reserve Bank.
A person resident outside India (i.e. NRI or PIO or foreign national of non-Indian origin) can inherit immovable property from
(a) a person resident in India.
(b) a person resident outside India.
However, the person from whom the property is inherited should have acquired the same in accordance with the foreign exchange regulations applicable at that point of time.
A NRI/PIO may repatriate the sale proceeds of immovable property in India;
(a) If the property was acquired out of freely convertible foreign exchange 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.
Repatriation of sale proceeds of residential property purchased by NRI / PIO 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/PIO may repatriate an amount up to USD one million, per financial year, as discussed below.
(b) If the property was acquired out of Rupee sources, NRI or 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.
From the NRO account, a NRI/PIO may repatriate up to USD one million per financial year (April-March), which would also include the sale proceeds of immovable property.
DISCLAIMER:While sufficient care has been taken to compile the aforesaid information, we urge the readers to take expert professional advice before initiating transactions. For further information please check the official Reserve Bank of India website: www.rbi.org.in