Rules for Acquisition & Transfer of Immovable Property in India by a Person Resident outside India
Acquiring immovable property in India by persons resident outside India is regulated under the various Sections of the Foreign Exchange Management Act (FEMA), 1999 as well as by the regulations contained in Notification issued by RBI from time to time.
We hereby reproduce some FAQ’s as clarified by RBI, on various issues relating to acquisition and transfer of immovable property in India by a person resident outside India and a person resident in India who is not a citizen of India. (Notification No. FEMA 21/2000-RB dated May 3, 2000)
Acquisition of Immovable Property in India
Q.1 Who can purchase immovable property in India?
A.1 Under the general permission available, the following categories can freely purchase immovable property in India:
i) Non-Resident Indian (NRI)- that is a citizen of India resident outside India
ii) 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
- at any time, held Indian passport, or
- who or either of whose father or 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.
Q.2. Do any documents need to be filed with Reserve Bank of India after purchase?
A.2. No. An NRI / PIO who has purchased residential / commercial property under general permission, is not required to file any documents with the Reserve Bank.
Q.3. How many residential / commercial properties can NRI / PIO purchase under the general permission?
A.3. There is no restrictions on the number of residential / commercial properties that can be purchased.
Q.4. Can a foreign national of Non-Indian origin be a second holder to immovable property purchased by NRI / PIO?
Q.5. Can a foreign national of Non-Indian origin resident outside India purchase immovable property in India?
Q.6 Whether immovable property in India can be acquired by way of gift?
A.6. (a) Yes, NRIs and PIOs can freely acquire immovable property by way of gift either from
- a person resident in India or
- an NRI or
- a PIO.
However, the property can only be commercial or residential. A foreign national of Non-Indian origin resident outside India cannot acquire any immovable property in India through gift.
Q.7. Whether a Non-resident can inherit immovable property in India?
A.7. Yes, a person resident outside India i.e.
- an NRI
- a PIO and
- 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.
Q.8. From whom can the Non-resident inherit immovable property?
A.8. A person resident outside India (i.e. NRI or PIO or foreign national of Non-Indian origin) can inherit immovable property from
- a person resident in India.
- 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.
Transfer of immovable property in India
Q.9 Can an NRI/ PIO/foreign national sell his residential / commercial property?
A.9. (a) NRI can sell property in India to-
- a person resident in India or
- an NRI or
- a PIO.
(b) PIO can sell property in India to
- a person resident in India
- an NRI or
- a PIO – with the prior approval of Reserve Bank
(c) Foreign national of Non-Indian origin including a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan can sell property in India with prior approval of Reserve Bank to
- a person resident in India
- an NRI
- a PIO
Q.10. Can a Non-resident gift his residential / commercial property?
A.10. Yes. NRI / PIO may gift residential / commercial property to –
- Person resident in India or
- an NRI or
(b) Foreign national of Non-Indian origin needs prior approval of Reserve Bank.
Q.11. Can residential / commercial property be mortgaged?
A.11. i) NRI / PIO can mortgage to:
(a) an authorized 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 mortgage only with prior approval of Reserve Bank
iii) a foreign company which has established a Branch Office or other place of business in accordance with FERA/FEMA regulations has general permission to mortgage the property with an authorized dealer in India.
Mode of payment for purchase
Q.12. How can an NRI / PIO make payment for purchase of residential / commercial property in India?
A.12. Payment can be made by NRI / PIO out of
(a) funds remitted to India through normal banking channel or
(b) funds held in NRE / FCNR (B) / NRO account maintained in India
No payment can be made either by traveler’s cheque or by foreign currency notes.
No payment can be made outside India.
Q.13. Can NRI / PIO, avail of housing loan in rupees from an authorized dealer or housing finance institution in India approved by the National Housing Bank for purchase of residential accommodation or for the purpose of repairs / renovation / improvement of residential accommodation ? How can such loan be repaid?
A.13. Yes, NRI/PIO can avail of housing loan in rupees from an Authorized Dealer or housing finance institution subject to certain terms and conditions. Such a loan can be repaid
- by way of inward remittance through normal banking channel or
- by debit to his NRE / FCNR (B) / NRO account or
- out of rental income from such property.
- by the borrower’s close relatives, as defined in section 6 of the Companies Act, 1956, through their account in India by crediting the borrower’s loan account.
Q.14. Can NRI / PIO repatriate the sale proceeds of immovable property? If so, what are the terms?
A.14. NRI / PIO may repatriate the sale proceeds of immovable property in India
(a) If the property was acquired out of foreign exchange sources i.e. remitted through normal banking channels / by debit to NRE / FCNR
The amount to be repatriated should not exceed the amount paid for the property:
- in foreign exchange received through normal banking channel or
- by debit to NRE account (foreign currency equivalent, as on the date of payment) or debit to FCNR (B) account.
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.
Q.15. Can an NRI/PIO repatriate the proceeds in case the sale proceed was deposited in NRO account?
A.15. 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.
Q.16. If a Rupee loan was taken by NRI/PIO from Authorized Dealer or housing finance institution for purchase of residential property can an NRI / PIO repatriate the sale proceeds of such property?
A.16. Yes, provided the loan has been subsequently repaid by remitting funds from abroad or by debit to NRE/FCNR (B) accounts
Q.17. If the property was purchased from foreign inward remittance or from NRE / FCNR (B) account, can the sale proceeds of property be repatriated immediately?
Q.18. Is there any restriction on number of residential properties in respect of which sale proceeds can be repatriated by NRI / PIO?
A.18. Yes, sale proceeds of not more than two residential properties can be repatriated.
Q.19. If the immovable property was acquired by way of gift by the NRI/PIO, can he repatriate abroad the funds from sale?
A.19. 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 Authorized Dealer and payment of applicable taxes.
Q.20. If the immovable property was received as inheritance by the NRI/PIO can he repatriate the sale proceeds?
A.20. Yes, general permission is available to the NRIs/PIO to repatriate the sale proceeds of the immovable property inherited from a person resident in India. NRIs/PIO may repatriate an amount not exceeding USD one million, per financial year, on production of documentary evidence in support of acquisition / inheritance of assets, an undertaking by the remitter and certificate by a Chartered Accountant in the formats prescribed by the Central Board of Direct Taxes vide their Circular No.10/2002 dated October 9, 2002
In case of a foreign national, sale proceeds can also be repatriated even if the property is inherited from a person resident outside India. But this is allowed only with prior approval of Reserve Bank. The foreign national has to approach Reserve Bank with documentary evidence in support of inheritance of the immovable property and the undertaking and the C.A. Certificate as mentioned above.
The general permission for repatriation of sale proceeds of immovable property is not available to a citizen of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan and Iran and he has to seek specific approval of Reserve Bank.
As FEMA specifically permits transactions only in Indian Rupees with citizens of Nepal and Bhutan, the question of repatriation of the sale proceeds in foreign exchange to Nepal and Bhutan would not arise.
Q.21. Can NRI / PIO rent out the residential / commercial property purchased out of foreign exchange / rupee funds?
A.21. Yes, NRI/PIO can rent out the property without the approval of the Reserve Bank. Rent received can be credited to NRO / NRE account or remitted abroad. Powers have been delegated to the Authorized Dealers to allow repatriation of current income like rent, dividend, pension, interest, etc. of NRIs/PIO who do not maintain an NRO account in India based on an appropriate certification by a Chartered Accountant, certifying that the amount proposed to be remitted is eligible for remittance and that applicable taxes have been paid/provided for.
Q.22. In which account can the sale proceeds of such immovable property be cr edited?
A.22. The sale proceeds may be credited to NRO account.
Q.23. Who can determine whether a person is resident in India or not?
A.23. Reserve Bank does not determine the residential status. Under FEMA, residential status is determined by operation of law. The onus is on an individual to prove his / her residential status, if questioned by any authority.