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Najma Shaikh

Adv. Najma Shaikh

Fort , Mumbai

Posted on: 29th Jun, 2016
If you are a Non Resident India (NRI) or a Person of Indian Origin (PIO), you can own any number of residential as well as commercial properties in India, there is no restraint on the outer limit. But, there is a restraint on purchase of agricultural land/farm house or plantation by a NRI. Although, an NRI can own such property only if they have been gifted to or inherited by him. 

There are certain important criteria which a NRI/PIO have to keep in mind while purchasing property in India.

1. Who can purchase property in India?

Non-Resident Indian (NRI) and Person of Indian Origin (PIO) (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan) who –
(a) at any time, held Indian passport, or 
(b) who or either of whose father or whose grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955) can hold immovable properties in India. 

2. What properties can be acquired ?

NRI / PIO may acquire/transfer immovable property in India other than agricultural land/farm house or a plantation property out of repatriable and / or non-repatriable funds.

NRI may acquire any immovable property in India other than agricultural land / farm house plantation property, 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
NRI 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.

3. How is the payment of purchase price to be made ?

The payment of purchase price should be made out of
a. funds received in India through normal banking channels by way of inward remittance from any place outside India or
b. funds held in any NRI account.

If you are looking for funding than according to RBI norms, a maximum of 80% of the value of property can be funded by a financial institution. The remaining 20% has to be remitted by the NRI. It is important to remember that Indian financial institutions give needs to be repaid in rupees only.

The monetary transaction must be in Indian rupees (INR) and through normal banking channels using an NRI account.

4. What are the required documents ?

Documents required for buying immovable properties in India are Pan card (Permanent account number), OCI/PIO card (In case of OCI/PIO), Passport (In case of NRI), Passport size photographs and address proof.

5. What are the tax benefits available ?

The tax benefits for a non-residential Indian (NRI) are very similar to the tax benefits of a resident Indian. An NRI is entitled to all tax benefits related to purchase of property that are allowed to a resident Indian.

India has Double Taxation Avoidance Agreements (DTAA) with several countries which give a favorable tax treatment in respect of certain heads of income. However, in case of sale of immovable property, the DTAA with most countries provide that the capital gains will be taxed in the country where the immovable property is situated. Hence, the NRI will be subject to tax in India on the capital gains which arise on the sale of immovable property in India. Also letting of immovable property in India would be taxed in India under most tax treaties in light of the fact that the property is situated in India.

6. Can a NRI/PIO mortgage the purchased property?
NRI/PIO are allowed to mortgage residential or commercial property to an authorized dealer or housing finance institution in India without the approval of the RBI. If NRI/IO wants to mortgage the property to a party abroad the  he has to obtain prior approval from the Reserve Bank of India. 

7. Can a NRI/PIO give the purchased property on rent ?
The NRI/PIO who has purchased the residential or commercial property can give the property on lease. The rent received may be credited to their NRE or NRO account or can be remitted abroad.

8. Can a NRI/PIO appoint a third person to complete the formalities?
NRI/PIO who is unable to come down to India for completing the paperwork can appoint a representative in India (with a power of attorney) to act on his behalf. The power of attorney should be notarised with the Indian consulate in the NRI/PIO’s country of residence.

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