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NRI Section

Market Overview

With the prices of property in India - be it commercial or residential - spiraling higher than those in the US and the UK, this is a good time for all Non-Resident Indians (NRIs) to consider investing in the country. And the boom times aren't limited to just the metros. The concept of ultra-modern private integrated townships and world class infrastructure has taken wing in a big way in practically all cities and satellite townships in the country, thereby making investments in property in India most lucrative.

Amendments to the Foreign Exchange Regulation Act (FERA) now allow NRIs to acquire residential and commercial properties without prior permission from the RBI. You can even let out the property and credit the Income to your NRO account. A certain percentage of that income may be even repatriated abroad. There is no limit on the number of properties an NRI can buy.

If the property is for residential use and purchased after May 26, 1993, you are allowed to repatriate the "original investment" after a lock-in period of three years (that is, three years from the date of final sale deed or date of last payment whichever is later). You would, of course pay capital gains tax on the profit you make on the sale. For NRIs who are foreign citizens of Indian origin, repatriation is limited to two residential properties.

Points to be checked

  • Repatriation is allowed only if payments for the purchase of the flat have been made through banks in India and from repatriable accounts (NRE/FCNR) - even if the purchaser pays through an NRE account you will not be able to take the funds out of India if you had not originally purchased it from an NRE/FCNR account.
  • Prior permission of the Income Tax department is necessary if the value of property being sold is more than certain limits (usually Rs. 10 lakhs for most cities. The ascribed value is more for the metros). Permission is to be obtained by Filling Form 37-I with the IT department.
  • Application for repatriation has to be made to the RBI within 90 days of the sale of the property. If one wishes to avoid capital gains tax on the sale of property, (20% for long term) you could use the funds from the sale of the property to purchase new property within two years from the date of sale of the first property. Don't use those funds! All you need to do is to keep the proceeds in a separate account with a nationalized bank till you purchase the new property. However, this exemption is applicable only with regard to residential houses and will not be applicable for sale of a plot of land or commercial property.

 

ACQUISITION OF IMMOVABLE PROPERTY

By NRIs holding Indian Passport 

  • NRIs holding Indian passport do not require prior permission of Reserve Bank of India 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 NRE/ FCNR/NRO account.

NRIs of Indian nationality do not require any permission for acquisition, transfer or disposal by way of gift of immovable property which is not a farmhouse or agricultural land or plantations property. Declaration on form IPI 7 for acquisition of commercial property for carrying on any industrial, commercial or trading activity by their proprietary/partnership firm in India is required to be filed with RBI within 90 days from date of purchase. 

 

SELLING

Sale of Immovable Property 

  • General permission has been given to non-residents holding Indian passports and foreign citizens of Indian origin, whether resident in India or not, to dispose 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 allowed to repatriate original investment in equivalent foreign exchange in residential/commercial properties after obtaining prior approval subject to a maximum of two houses under certain conditions.
  • No transfer of any immovable property exceeding the specified value for different cities can be effected unless particulars are filed with the appropriate 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, instead of deducting from the proceeds of transfer, actual amount spent to acquire the asset or the amount spent on improvement or addition thereto, the inflation index adjusted cost will be deducted. Brokerage, legal fees and other expenses incurred in selling the property would be allowed as a deduction from the taxable capital gains.

NRIs of Indian nationality do not require any permission for acquisition, transfer or disposal by way of gift of immovable property which is not a farmhouse or agricultural land or plantations property. Declaration on form IPI 7 for acquisition of commercial property for carrying on any industrial, commercial or trading activity by their proprietary/partnership firm in India is required to be filed with RBI within 90 days from date of purchase. 

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