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Get NRI Inclined Well Upon Indian Real Estate
Consider to Indian Real Estate market an opportunistic option to invest in by NRI, PIO and OCI. Though the market of realty needs is none other a growth of pocket’s size, it comes ensuring one rely on it when to bear in mind getting your property an investment plan more than a dwelling one. Today, buying a property definitely brings itself as one of the greatest Indian dreams. So it does not mean which part of the world you reside in. The real estate of India’s growth prospect draw in investors from every parts of the world, so NRI’s are looking to taking advantage of Buying Property in India.
Though NRIs have always been opportunistic in terms of investment avenues and returns, the Government commonly produces new schemes to draw more and more investments from abroad. Yes, the real estate appears as one of the sectors which constantly grab the attention of non-residents.
Also the Reserve Bank of India has permitted to all non-residents who own Indian passports as well as people of Indian origin to put their money in the real estate sector. The number of NRIs endowing in real estate is boosting fast as the value of the rupee is decreasing and real estate offers better returns.
The RBI along with the Foreign Exchange Management Act (FEMA) has become easygoing in terms of rules and regulations for non-residents who are looking for an investment in the Indian Real Estate Market. They are not only simplifying the rules but also offering the benefit of repatriation of the capital involved.
To begin with, we need to comprehend the definition of non-resident Indian. Since property purchases are ruled by FEMA, we need to pass by the definition of NRI as stated in FEMA. According to FEMA, an NRI is a citizen of India who is resident outside India.
Non Resident Indian (NRI) is a citizen of India, who stays abroad for employment/carrying on business or vocation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad is a non-resident. Non-resident foreign citizens of Indian Origin are treated at par with Non Resident Indian (NRIs).
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).
1) Any person of full age and capacity:
2) Who is a citizen of another country, but was a citizen of India at the time of, or at any time after, the beginning of the constitution, or
3) Who is a citizen of another country, but was entitled to become a citizen of India at the time of the commencement of the constitution, or
4) Who is a citizen of another country, but belongs to a territory that became part of India after the 15th Day of August, 1947.
5) Who is a child of such a citizen, or
6) A person, who is minor child of a person mentioned in clause (a)
Provided that no person, who is or had been a citizen of Pakistan, Bangladesh shall be eligible for registration as an Overseas Citizen of India.
Documents Needed To Buy Property
- Pan card (Permanent account number)
- OCI/PIO card (In case of OCI/PIO)
- Passport (In case of NRI)
- Passport size photographs
- Address proof
Who Can Buy Immovable Property in India?
Under the general permission given by RBI, the following categories could freely buy immovable property in India:
a) Non-Resident Indian (NRI)-that is a citizen of India residing outside India
b) Person of Indian Origin (PIO)-that is 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 whose grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).
The general permission, however, covers only purchase of residential and commercial property and not for purchase of agricultural land/plantation property/farm house in India. OCI could buy immovable property in India apart from agricultural land/plantation property/farmhouse.
The general permission has been given to non-residents holding Indian passports and foreign citizens of Indian origin, whether resident in India or not, to arrange of by sale or inheritance immovable properties situated in India subject to certain conditions.
Non residents holding Indian passports and foreign citizens of Indian origin have been let to repatriate original investment in equal to foreign exchange in residential/commercial properties after getting prior approval subject to a maximum of two houses under the sure conditions.
No transfer of any immovable property exceeding the particular value for different cities could be affected unless the particulars are filed with the fitting authority of the Income Tax department within 15 days of signing the agreement.
As per a new scheme of capital gains tax with effect from 1993-94, in place of taking away from the proceeds of transfer, actual amount spent to get the asset or the amount spent on enhancement or addition thereto, the inflation index adjusted cost will be removed. Brokerage, legal fees and other expenses incurred in selling the property would be let as a deduction from the taxable capital gains.
According to the regulations of FEMA and RBI, an NRI is permitted to make specific investment in real estate. A NRI is allowed to do the following investments in property:
- Any immovable property could be purchased by an NRI in India other than any agricultural land, farm house and plantation property.
- He may get any immovable property as mentioned above by gift from Indian resident, Indian citizen residing outside India or person of Indian origin.
- Get any property by inheritance.
- He could transfer immovable property to any resident of India by sale.
- He can move any agricultural land, farm house or plantation land to any resident of India by gift.
- He can also transfer his residential or commercial property by means of gift to any person either residing in India or abroad or person of Indian origin.
The Exchange Control Regulations
Dissimilar to the initial times, the restrictions relevant to investment by NRIs in Indian properties have been lessened. An NRI could easily purchase a property with the funds received from regular banking. Also an NRI can hold a Foreign Currency Non-Resident FCNR account, Non-Residential External (NRE) account or a Non Resident Ordinary (NRO) account to prepare a property purchase. An NRE account is necessary for the pay outs and an NRO account is vital for the depositing and the transferring of money.
An NRI or PIO could repatriate the proceeds from the sale of immovable property in India on the following conditions:
- The property was bought by the NRI/PIO in accordance with the provisions of FEMA in force at the time of the purchase
- The amount repatriated should not go beyond the amount paid for the property if the property was acquired in foreign exchange sent through normal banking channels or out of funds held in an FCNR (B) account
In the following circumstances, the NRI/PIO may repatriate a maximum of USD one million per financial year:
- Out of the balances held in the NRO account if the property was purchased out of rupee sources
- If the property was acquired by way of gift, the sale proceeds must be credited to an NRO account, and then may be repatriated
- If the property was taken over from a person resident in India, it may be repatriated on production of documentary evidence verifying inheritance, an undertaking by the NRI/PIO, and a certificate by a Chartered Accountant in the formats prescribed by the Central Board of Direct Taxes
If an NRI has a property in India and desires to sell it away, he/she could sell it to another NRI or any person residing in India who is free from any legal issues. On the other hand, the purchase or sale of a farm house or other agricultural land is not permitted, but gifting of an agricultural land or a farm house or plantation land is allowable to a resident of India. The same follows with an NRI or a PIO.
In case if an NRI wishes to lend out a property, he/she could rent the immovable property. On the other hand, the rental income or the profit which gets itself made as returns from the property will be eligible to repartition for payment of taxes and payment of a certificate produced by a chartered accountant.
It is suggested that an NRI should give the power of attorney to an Indian resident who is trustworthy. In case, the NRI is not present in India for the legal formalities, the trusted person could complete all the formalities.
Setting free Immovable Property
The RBI has granted general permission to NRI’s and foreign citizens of Indian origin, to give permission their residential properties obtained for their bona fide residential purpose but which on account of their residence abroad, are not necessary for their instant residential purpose.
On the other hand, there are restrictions concerning the repatriation of the rental income earned from such letting out of the property. The rental income is on a non-repatriation basis. As a result, funds (Rental Income) must be credited to the NRO Account/Resident Accounts in India.
Under the FEMA rules, if you are an NRI, you may sell any residential or commercial property you have bought or inherited to anyone you wish. If you have any taken over agricultural property, plantation or farm house, you have to look for for a resident Indian to buy it. On the other hand, you are permissible to gift them to another NRI or the person of Indian origin. There are some particular RBI guidelines on the repatriation of sale proceeds needed to be adhered to.
Also you need to decide on whether you want money as repatriateble or not. If you want to repatriate, it requires to come in foreign currency from an overseas account, NRE or FCNR account. One can repatriate up to the amount invested in the property.
The other condition is that repatriation cannot go beyond the foreign exchange amount paid for purchase of property through banking channels. Refund of application money and advance on cancellation has no limitations. Also, it must be noted that an NRI cannot repatriate proceeds of more than two properties.
Under section 24 of the Income Tax Act, the interest on home loan appears deductible from the income from house property to the extent of Rs 1.5 lakh per annum. Further, up to Rs 1 lakh of principle repayment can be deducted under section 80C.
This interest can be deducted from rental income. In case of self-occupied property discussed earlier, your rental income will be zero but you can still claim a deduction of interest of up to Rs 1.5 lakh. In such a case, you would have a loss from house property.
The loss could be set off against income from other sources like interest income, capital gains etc. If the loss is not completely exhausted in a particular year, it can be carried forward for 8 years. That is, you can show the loss in your tax returns for the next 8 years and off-set it against other income. But once taken forward, the loss can be begun only against income from house property.
Can an NRI Give Power Of Attorney For Property Purchase Transactions?
Really, experts recommend that you give a PoA to a person resident in India so that he or she may complete formalities such as registration, possession, execution of agreement of sale etc. A PoA could be given to execute all contracts, deeds, lease, sell and all matters relating to manage the property.
On the other hand, it comes better to give a specific power of attorney to any person at any given time, controlled only to a single action such as only purchase. The power of attorney should be done on a stamp paper or as maintained by the requirement of the country where the PoA is performed. You must then get the PoA attested by any allowed official of the Indian Embassy/Consulate/Trade commissioner in that country.
Over and over, when NRIs purchase properties, developers insist a PoA in their favour. You may decide not to offer this PoA but it would lead to delays since all documents would have to be forwarded to your foreign address.