Are you a Non-Resident Indian (NRI) and uninformed of your rights over making a real estate investment in India? And, are you completely aware of what kind of properties you can buy or sell in India? Well, several others like you who are looking forward to either make or exit their investments in India have raised queries on the consumer forum of Magicbricks, .
In order to explain the legalities of purchasing in India, it is first required to understand, who as per law is recognised as a NRI. “The persons residing outside India are categorised as Non- Resident Indians (NRI) or a foreign national of Indian Origin (PIO) or a foreign national of non-Indian origin. While NRIs and PIOs can definitely acquire/dispose properties in India, a foreign national of non-Indian origin is also covered by the relevant notifications in our country,” says Asha Basu, partner, S Jalan and Co Advocates.
The buying transaction of a NRI is governed by the Reserve Bank of India (RBI) and the rules and regulations fall under the purview of the Foreign Exchange Management Act (FEMA).
Giving an insight on the legal rights of NRIs for investing in India, Basu adds, “Any NRI, holding an Indian Passport, does not require prior permission from the RBI to buy residential or commercial immovable property in India. The purchase consideration may be paid either by remittance of funds from abroad through normal banking channels or out of the Non-Resident External (NRE), Foreign Currency Non Resident (FCNR) or Non-Residential Ordinary (NRO) accounts.”
“NRI of Indian nationality does not require any permission for acquisition, transfer or disposal ofproperty by the way of gift of immovable property. However, this property should not be a farmhouse, an agricultural land or a plantations property. A declaration on form IPI 7 is required to be filed with RBI within 90 days of the date of purchase, in order to acquire a commercial propertyfor carrying out any industrial, commercial or trading activities by proprietary partnership firm in India,” adds Basu.
In fact, not only sell, but any NRI/PIO can even rent out their property without the approval of the RBI. The rent received can be credited to Non-Resident Ordinary (NRO)/Non-Resident External (NRE) account or even dispatched abroad.
Answering one of the users enquiring about whether a NRI/PIO requires seeking permission from the Reserve Bank of India (RBI) in order to sell their property, the legal expert of Magicbricks says, “As long as the property is being sold to a resident of India, a NRI or a PIO, one does not need to seek any permission from RBI.”
In another aspect where users needed to know whether they can apply for home loans in India, Magicbricks issued a set of guidelines for NRI Investments on its online property fair, India Calling. As per the guidelines, NRIs can take a home loan for purchase of a property. RBI also allows NRIs to take a loan for repairs and renovations of their home. RBI states in its website that the buyer, however, has to adhere to the FEMA regulations at the time of taking the loan. “Banks cannot grant fresh loans or renew existing loans in excess of Rs 1 crore against NRE and FCNR deposits, either to the depositors or to third parties,” the site mentions.
Such loans can be repaid by different means. For instance, by way of inward remittance through normal banking channel, by debit to the NRE/FCNR/NRO account of the NRI/ PIO, out of the rental income from such a property or by cheques from one’s local relative’s bank account.
Are NRIs liable to pay capital gain taxes on sale of their properties? Subhash Lakhotia, tax and investment consultant, R N Lakhotia & Associates answers in the Guide to Buying a House by Magicbricks, “The tax liabilities in India are the same for a resident India, a non-resident Indian or a foreigner. If one sells a residential property in India after holding it for a period lesser than 3 years, they are liable to accrue Short-Term Capital Gains (STCG). It is not possible to save tax on the STCG. The sale proceeds in this case are added to the income of the property owner and tax is calculated according to the slab rates of Income Tax.
“In order to save taxes on long-term capital gains, which are arrived after disposing a property by holding it for a minimum of three years, NRIs can invest the sale proceeds in a residential property. In case the sale proceeds are not re-invested, a tax of about 20 per cent of the total gains has to be then paid,” adds Lakhotia.
The road to investments in India for the NRIs is clear. They can not only buy or sell property but can also reap in the benefits of renting out the property.
Source: Times of India