10 Mins to Acquiring Property in India by Non Residents

By Phyllis Hayes,2014-11-22 16:15
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10 Mins to Acquiring Property in India by Non Residents

Buying, selling and leasing Immoveable Property by NRIs A

    comprehensive Guide

    ; Which categories of persons can purchase immoveable property in


    ; Only Non Resident Indians and Persons of Indian Origin are allowed

    to purchase immoveable property in India

; What is the definition of Person of Indian origin

    ; PIO means an Individual who at ant time held an Indian passport or

    who or whose parents or grand-parents were at any point citizens if

    India at any point in time. However citizens of Pakistan, Bangladesh,

    Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan are not

    eligible to be called PIOs even if they satisfy the above conditions.

    ; Is there any restriction on the type of property that can be purchased? ; No. NRIs/PIOs can purchase both commercial and residential

    properties in India. However, the NRI/PIO/foreign citizen of non-

    Indian origin cannot purchase agricultural land, plantation or farm

    house in India

; How many properties can the NRIs/PIOs purchase?

    ; There is no restriction on the number of properties that can be


    ; Do NRIs/PIOs have to file any declaration / take permission of the

    Reserve Bank of India for the purchase of immoveable property? ; No. There is no declaration / return to be submitted to the submitted

    to the Reserve bank of India either before or after the purchase.

    ; Can the NRI/PIO take a loan from an Indian bank in rupees for

    purchase of immoveable property in India?

    ; Yes.

; Can the NRI/PIO give the property on rent ?

    ; Yes. The rental income can be credited to the NRE/NRO Account

    and even remitted out of India

; Can the rental income be repatriated/

    ; Yes. The rent should be credited to the Non resident Ordinary (NRO)

    Account and the bank will allow repatriation of the rent receipt on the

    basis of a certificate from a Chartered Accountant.

; What is the treatment for taxation of rental income?

    ; The rental income does not get any special treatment for taxation. It

    is included in the total income of the NRI and gets taxed at the

    normal rates of tax.

    ; Can foreign citizens of non-Indian origin purchase property in India? ; No. foreign citizens i.e. individuals who are neither NRIs nor PIOs

    cannot purchase immoveable property in India.

    ; Can foreign citizens of non-Indian origin take a property on lease in


    ; Yes. The foreign citizens of Non-Indian origin can take a property on

    lease without permission of the RBI if the lease period does not

    exceed 5 years.

    ; Are there any restrictions on sale of property in India? ; No. The NRI/PIO can freely sell the property without taking the

    permission of any authority such as the Bank of the RBI.

    ; Can the amounts received on sale of property be repatriated? ; Yes. However there are different treatments for repatriation

    depending upon whether the property was purchased in Indian

    currency or foreign currency.

    o Repatriation of sale proceeds of Property originally

    purchased in Indian currency

    There is a 10 year lock in period for property purchased in

    Indian currency i.e. the property can be sold only after

    holding it for 10 years. If the property is sold earlier than this

    period, then the NRI has to ensure that the sale proceeds of

    the property are kept in a Non Resident Ordinary (NRO)

    Account for the balance period. E.g. if the property is sold

    after 2 years of its purchase, then the NRI will have to hold

    the entire amount of sale proceeds in an NRO Account for 8

    years and only after the end of that 8 year period he will get

    the facility of repatriation. This repatriation facility is available

    in respect of any number of properties. The only restriction is

    that the amount to be repatriated should not exceed USD 1

    Million per year

    o Repatriation of sale proceeds of Property originally

    purchased in foreign currency

    If the property has been purchased using foreign currency,

    then there is no lock in period for getting the repatriation

    benefit. e.g. you can sell the property even within an year of

    its purchase. However there are two restrictions which apply

    in case the property has been purchased using foreign

    exchange. Firstly the repatriation facility is only available for

    two properties. Secondly the maximum amount that can be

    repatriated will be restricted to the amount originally brought

    into India in foreign exchange or the amount transferred from

    his NRE Account at the time of the purchase. This if the NRI

    has purchased four properties in India using foreign currency

    and sells three of them, he will be able to remit the amount

    equivalent to the purchase price only for only two properties.

    He will not be able to repatriate the profit on sale of the


    ; What is the treatment for taxation of capital gains arising from sale of property?

    o If the property is a long term capital asset i.e. asset which

    has been held for three or more years by the NRI, then the

    capital gains are chargeable at the rate of 20%

    o If the property has been held for a period of less than 3

    years, then the capital gains are included in the normal

    income of the NRI and charged at the usual slab rates.

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