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

1. At any time, held Indian passport, or
2. 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)

Under the general permission granted by RBI, the following categories can freely purchase immovable property in India:

1. Non-Resident Indian (NRI)- that is a citizen of India residing outside India
2. 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

1. at any time, held Indian passport or
2. 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..

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.

1. Pan card (Permanent account number)
2. OCI/PIO card (In case of OCI/PIO)
3. Passport (In case of NRI)
4. Passport size photographs
5. Address proof

There are no restrictions on the number of residential / commercial properties that can be purchased.

No. An NRI / PIO who has purchased residential / commercial property under general permission, is not required to file any documents with the Reserve Bank.

No. A foreign national of non-Indian origin, resident outside India cannot purchase any immovable property in India. But, he/she may take residential accommodation on lease provided the period of lease does not exceed five years. In such cases, there is no requirement of taking any permission of or reporting to Reserve Bank

No.

Yes, but the person concerned would have to obtain the approvals, and fulfill the requirements if any, prescribed by other authorities, such as the concerned State Government, etc.

However, a foreign national resident in India who is a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan would require prior approval of Reserve Bank. Such requests are considered by Reserve Bank in consultation with the Government of India.

1. Yes, NRIs and PIOs can freely acquire immovable property by way of gift either from
   1.  a person resident in India or
   2. an NRI or
   3. 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.

2. A foreign national of non-Indian origin resident outside India cannot acquire any immovable property in India through gift.

Yes, a person resident outside India i.e.

1.  an NRI
2. a PIO and
3. 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.

A person resident outside India (i.e. NRI or PIO or foreign national of non-Indian origin) can inherit immovable property from

1. a person resident in India.
2. 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.

Yes.

1. NRI / PIO may gift residential / commercial property to –
   1. person resident in India or
   2. an NRI or
   3.  PIO.
2. foreign national of non-Indian origin needs prior approval of Reserve Bank.

1. NRI / PIO can gift but only to a person resident in India who is a citizen of India.
2. foreign national of non-Indian origin needs prior approval of Reserve Bank

Payment can be made by NRI / PIO out of

1. funds remitted to India through normal banking channel or
2. 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.
No payment can be made outside India.

An authorized dealer or a housing finance institution in India approved by the National Housing Bank may provide housing loan to a non-resident Indian or a person of Indian origin residing outside India. for acquisition of a residential accommodation in India, subject to the following conditions, namely:

1. The quantum of loans, margin money and the period of repayment shall be at par with those applicable to housing finance provided to a person residing in India.
2. The loan amount shall not be credited to Non-resident External (NRE)/Foreign Currency Non-resident (FCNR)/Non-resident non-repatriable (NRNR) account of the borrower.
3. The loan shall be fully secured by equitable mortgage by deposit of title deal of the property proposed to be acquired, and if necessary, also be lien on the borrower’s other assets in India.
4. the installment of loan, interest and other charges, if any, shall be paid by the borrower by
   1. remittances from outside India through normal banking channels
   2. out of funds in his Non-resident External (NRE)/Foreign Currency Non-resident (FCNR)/Non-resident Non-repatriable (NRNR)/Non-resident Ordinary (NRO)/non-resident Special Rupee (NRSR) account in India,
   3. out of rental income derived from renting out the property acquired by utilization of the loan or
   4. by any relative of the borrower in India by crediting the borrower’s loan account through the bank account of such relative (The word ‘relative’ means ‘relative’ as defined in section 6 of the Companies Act, 1956.)
5. The rate of interest on the loan shall conform to the directives issued by the Reserve Bank of India or, as the case may be, the National Housing Bank.

NRI / PIO may repatriate the sale proceeds of immovable property in India

1. If the property was acquired out of foreign exchange sources i.e. remitted through normal banking channels / by debit to NRE / FCNR (B) account The amount to be repatriated should not exceed the amount paid for the property:
   1. in foreign exchange received through normal banking channel or
   2. by debit to NRE account(foreign currency equivalent, as on the date of payment) or debit to FCNR
   3. account.
2. Please Note:-
   1. Repatriation of sale proceeds of residential property purchased by NRI / PIO out of foreign exchange is restricted to not more than two such properties.
   2. 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.
3. 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.

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.

Yes, provided the loan has been subsequently repaid by remitting funds from abroad or by debit to NRE/FCNR(B) accounts

Yes.

Yes, sale proceeds of not more than two residential properties can be repatriated.

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.

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. [cf. A. P. (DIR Series) Circular No.56 dated November 26, 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.

Tax on rental income
Rental income shall be chargeable u/s 56 of the Income Tax Act, 1961 (hereinafter referred as “Act”) under head “Income from House Property” and taxed at normal rate of tax as applicable to individuals. However u/s 195 read with Finance Act, 2008 the tax @ 33.99 % shall be deducted at source.

Tax on Capital Gains
Capital gains shall be chargeable to tax u/s 45 read with section 112. Tax shall be deducted at source @ 33.99% in case of short term capital gains and @ 22.66% in case of long term capital gains according to section 195 read with Finance Act 2008.

If you are an NRI/OCI/PIO, you would have to file your income tax returns if you fulfill either of these conditions:

1. Your taxable income in India during the year was above the basic exemption limit of 1.6 lakh OR
2. You have earned short-term or long-term capital gains from sale of any investments or assets, even if the gains are less than the basic exemption limit.

Note: The enhanced exemption limit for senior citizens and women is applicable only to residents and not to non-residents.

Yes, there are two exceptions:

1. If your taxable income consisted only of investment income (interest) and/or capital gains income and if tax has been deducted at source from such income, you do not have to file your tax returns.
2. If you earned long term capital gains from the sale of equity shares or equity mutual funds, you do not have to pay any tax and therefore you do not have to include that in your tax return.

Tip: You may also file a tax return if you have to claim a refund. This may happen where the tax deducted at source is more than the actual tax liability. Suppose your taxable income for the year was below 1.6 lakh but the bank deducted tax at source on your interest amount, you can claim a refund by filing your tax return.

Another instance is when you have a capital loss that can be set-off against capital gains. Tax may have been deducted at source on the capital gains, but you can set-off (or carry forward) capital loss against the gain and lower your actual tax liability. In such cases, you would need to file a tax return.

Traditionally, you could file your return either by giving a power of attorney to someone in India or by sending your form and documents to a tax expert in India who would then file returns on your behalf.

But nowadays, the easiest option for NRIs to file their Indian tax returns is by using the online platform. There are several options to file online.

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 non-resident will be subject to tax in India on the capital gains which arise on the sale of immovable property in India. Letting of immovable property in India would be taxed in India under most tax treaties in view of the fact that the property is situated in India.
In case the non-resident pays any tax on capital gains arising in India, he would normally be able to obtain a tax credit in respect of the taxes paid in India in the home country, because the income in India would also be included in the country of tax residence. The amount of the tax credit as also the basis of computing the tax credit that can be claimed are specified in the respective country’s DTAA and is also dependent on the laws of the home country where the tax payer is a tax Resident.

Case Study
Mr. A is a British Citizen and a person of Indian origin. He has inherited a garage from his father in year 1981 which he sold on 3rd September 2006 for Rs. 12,00,000.

He purchased a flat at Goa on 19th June 2006, for Rs. 45,00,000 out of which Rs. 10,28,280 is brought in foreign exchange. The flat was sold on 30th May 2008 for Rs. 57,00,000.

Mr. A is proposing to remit Rs. 60,00,000 to U.K.

QUESTIONS

1. Can the sale proceeds be remitted outside India?
2. What is the procedure for remittance and documentation?
3. In case it is not possible to remit Rs. 60,00,000, what is maximum amount that can be remitted and the related procedure?

In the instant case, Mr. A has inherited garage from his father and has purchased a flat out of the inward remittance and funds to the credit of NRO account, therefore the acquisition of the properties is in accordance with the provisions of FEMA.

Hence remittance of the entire amount is possible under USD 1 million scheme of Notification No. 13 on production of the documentary evidence in support of the acquisition and submission of undertaking & C.A. certificate.