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Provisions of Foreign Exchange Regulations in India for transactions in immovable property
To understand legal provisions, few definitions are given below:
Who is 'Person resident in India'?
“Person resident in India” means -
(i) a person residing in India for more than one hundred and eighty-two days during the course of the preceding financial year but does not include-
(A) a person who has gone out of India or who stays outside India, in either case-
(a) for or on taking up employment outside India, or
(b) for carrying on outside India a business or vocation outside India, or
(c) for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period;
(B) a person who has come to or stays in India, in either case, otherwise than-
(a) for or on taking up employment in India, or
(b) for carrying on in India a business or vocation in India, or
(c) for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period;
(ii) any person or body corporate registered or incorporated in India,
(iii) an office, branch or agency in India owned or controlled by a person resident outside India,
(iv) an office, branch or agency outside India owned or controlled by a person resident in India;
Who is 'Person resident outside India'?
'Person resident outside India' means a person who is not resident in India;
Who is 'Person of Indian Origin'?
'Person of Indian 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
(i) at any time, held Indian passport, or
* (ii) who or either of whose father or mother or whose grandfather or grandmother was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).
* words 'mother' and 'grandmother' inserted w.e.f. November 12, 2009
::Acquisition of immovable property in India::
Can a foreign national of non-Indian Origin resident outside India purchase immovable property in India?
No, a foreign national of non-Indian Origin resident outside India cannot purchase immovable property in India.
Who can purchase immovable property in India ?
General permission is available to purchase immovable property in India to a person resident outside India who is a citizen of India (NRI) or who is a person of Indian origin (PIO). Thus, NRI and PIO can purchase immovable property in India.
How many residential / commercial properties can NRI / PIO purchase under the general permission?
There are no restrictions on the number of residential / commercial properties that NRI/ PIO can purchase under the general permission available.
Is NRI / PIO who has purchased residential / commercial property under general permission required to file any documents with Reserve Bank of India?
NRI / PIO who has purchased residential / commercial property under general permission is not required to file any documents with the Reserve Bank.
Whether NRI/PIO can acquire agricultural land/ plantation property / farm house in India?
No. Since general permission is not available to NRI/PIO to acquire agricultural land/ plantation property / farm house in India, such proposals will require specific approval of Reserve Bank and the proposals are considered in consultation with the Government of India.
Can a person who had bought immovable property when he was a resident, continue to hold such property even after becoming an NRI/PIO?
Yes, he can continue to hold the residential/commercial property / agricultural land/ plantation property / farm house in India without the approval of the Reserve Bank.
How can an NRI / PIO make payment for acquisition of immovable property in India ?
Payment can be made by NRI/ PIO 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 Non-resident account maintained in accordance with the FEMA, like funds held in NRE / FCNR (B) / NRO account maintained in India.
No payment can be made either by traveller’s cheque or by foreign currency notes or by other mode than those specifically stated above.
No payment can be made outside India.
Whether a non-resident can inherit immovable property in India?
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.
From whom can the non-resident inherit immovable property?
A person resident outside India 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.
Whether immovable property in India can be acquired by way of gift?
(a). Yes, NRI/PIO can freely acquire immovable property by way of gift either from
(i) a person resident in India or
(ii) a NRI or
(iii) a PIO
However the property can only be commercial or residential. Agricultural land/ plantation property / farm house in India cannot be acquired by way of gift.
(b). A foreign national of non-Indian Origin resident outside India cannot acquire immovable property in India through gift.
Can a non-resident transfer by way of gift his residential / commercial property?
Yes. NRI / PIO may transfer by way of gift residential / commercial property in India to -
i) a person resident in India or
ii) a NRI or
iii) a PIO.
Foreign national of Non-Indian origin can transfer by way of gift residential / commercial property property in India with prior approval of Reserve Bank.
Is PAN required to acquire immovable property?
NRI should apply for PAN card while opening a NRE/ NRO bank account with designated bank branch, which is approved by RBI for the purpose. At the time of renting out property or repatriation of property PAN card is required.
::Transfer of immovable property::
Can a NRI / PIO / a foreign national of non-Indian Origin transfer by way of sale his residential / commercial property?
(a) NRI can transfer by way of sale his property in India to -
i) a person resident in India or
ii) a NRI or
iii) a PIO
(b) PIO can transfer by way of sale his property in India to -
i) a person resident in India or
ii) a NRI – with the prior approval of Reserve Bank or
iii) a PIO - with the prior approval of Reserve Bank .
(c) Foreign national of Non-Indian origin can transfer by way of sale his property in India with prior approval of Reserve Bank to -
i) a person resident in India or
ii) a NRI or
iii) a PIO
To whom can NRI / PIO / foreign national of non-Indian origin resident outside India transfer by way of gift agricultural land / plantation property / farm house in India ?
(i) NRI / PIO may transfer by way of gift agricultural land / plantation property / farm house in India to a person resident in India who is a citizen of India.
(ii) foreign national of non-Indian origin resident outside India would need to seek prior approval of Reserve Bank for transfer by way of gift agricultural land / plantation property / farm house acquired by him in India.
Can residential/commercial property be transferred by way of mortgage?
i) NRI/ PIO can transfer by way of mortgage to:
(a) an authorised dealer/ housing finance institution in India - without the approval of Reserve Bank.
(b) a party abroad - with prior approval of Reserve Bank.
ii) a foreign national of non-Indian origin can transfer by way of mortgage - only with prior approval of Reserve Bank
iii) a foreign company which has established a Branch Office or other place of business for carrying any activity, excluding a liaison office in accordance with Foreign Exchange Management (Establishment in India of Branch or Office or other Place of Business) has general permission to transfer by way of mortgage to an authorized dealer in India.
What shall be the option if there is refund of application money/payment made by the building agencies/seller because of non allotment of flat/plot/cancellation of bookings/ contracts?
The amount of refund, together with interest (net of income tax) can be credited to NRE account. This is subject to condition that the original payment was made by way of inward remittance or by debit to NRE / FCNR (B) account.
::Repatriation of sale proceeds::
Can NRI/PIO repatriate the sale proceeds of immovable property? If so, what are the terms?
(i) NRI/ PIO may repatriate the sale proceeds of immovable property other than agricultural land / plantation property / farm house in India -
(a) If the immovable property was acquired by the seller in accordance with the provisions of the foreign exchange laws in force at the time of acquisition by him or the provisions of FEMA Regulations;
(b) The amount to be repatriated does not exceed
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the amount paid for the property in foreign exchange received through normal banking channel or out of funds held in Foreign Currency Non-Resident Account or
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the foreign currency equivalent, as on the date of payment , of the amount paid were such payment was made from the funds held in Non-Resident External Rupee Account for acquisition of the property; and
(c) Repatriation of sale proceeds of residential property purchased by NRI/ PIO is restricted to not more than two such properties.
(ii) 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 bona fide purposes to the satisfaction of the Authorized Dealer Category-I bank and subject to tax compliance.
Can an NRI/PIO repatriate the proceeds in case the sale proceed was deposited in NRO account?
From the NRO account, NRI/PIO may repatriate up to USD one million per financial year (April-March), which would also include the sale proceeds of immovable property.
Is there any restriction on number of residential properties in respect of which sale proceeds can be repatriated by NRI/ PIO?
Yes, sale proceeds of not more than two residential properties can be repatriated.
If the immovable property was acquired by way of gift by the NRI/PIO, can he repatriate abroad the funds from sale?
The sale proceeds of immovable property acquired by way of gift should be credited to NRO account only. From the balance in the NRO account, NRI/PIO may remit up to USD one million, per financial year, subject to the satisfaction of Authorised Dealer and payment of applicable taxes.
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