Explore guidelines, permissions & procedures for NRI property purchase in India. Understand rules on payments, gifts, inheritance, joint purchases, loans, rentals & more. Expert advice available. Contact us for clarity on residential/commercial property transactions and FEMA compliance.
Introduction: The acquisition of commercial or residential property in India by Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) is governed by the Foreign Exchange Management Act (FEMA) and the FEMA (Non-Debt Instrument) Rules 2019. This article provides comprehensive insights into the regulations, permissions, and procedures involved in such property transactions.
1. General Permission for Purchase:
There is a general permission available to NRI/OCI for purchase of commercial or residential property in India. There is no requirement of filing of any documents/reports to Reserve Bank of India. Under the general permission, any number of residential and commercial properties can be purchased.
However, the aforesaid general permission is not available for purchase of
- agricultural land
- Plantation
- Farm house in India
Payment:
NRI/OCI can payment through either of these modes:
(a) Funds remitted to Indian through normal banking channels or
(b) Funds maintained in NRE/FCNR(B)/NRO accounts
Please take note that such payments cannot be made either by traveller’s cheque or by foreign currency notes or any other modes.
2. Gift: NRI/OCI can freely acquire commercial or residential property by way of gift either from (i) a person resident in India; or (ii) a NRI; or (iii) OCI who is relative under the Companies Act
Please take note that no gift of agricultural land/plantation property/farm house can be received by NRI/OCI. Also, a foreign national of non-Indian origin resident outside India cannot acquire any immovable property in India by way of gift.
3. Inheritance: A person resident outside India (NRI or PIO or foreign national of non-Indian origin) can inherit immovable property from any of the following:
- A Person resident in India
- A person resident outside India
Please note that the inherited property must have been earlier acquired by the transferor in compliance of FEMA/FERA law as applicable.
4. Joint Purchase:
Spouse of a NRI or OCI can purchase one immovable property jointly with her/his NRI/OCI spouse.
Consideration shall be paid out of funds received in normal banking channels or by debit to non-resident account. Such payments cannot be again made by travellers ‘cheques or by foreign currency notes. The marriage must be subsisting at least for 2 years at the time of the purchase.
5. Cancellation of flats:
Where the builder or seller cancels the deal or allotment is not made, the amount originally paid will be refunded back to the NRE/FCNR account or through normal banking channels. But the authorised dealer(bank) must be satisfied with the genuineness of the transaction
6. Loan to NRI/PIO against security of funds in NRE/FCNR (B)/NRO:
A NRI/PIO can avail the loan facility against the security of the funds available in his accounts.
Repayment of such loan can be made in either of these ways
- By way of inward remittance through normal banking channel;
- By debit to NRE/FCNR (B)/NRO account for the NRI/PIO
- Out of rental income of such property
- By the borrower’s close relatives in India
7. Renting out the residential/commercial property:
NRI/PIO can rent out any such property and there is no need of any approval. The rent can be remitted abroad or credited to NRO/NRE account. In case of non-maintaining of NRO account, a CA can certify the eligibility of the remittance and that the applicable taxes have been paid.
8. Purchase by a Long-Term Visa Holder:
The Long-Term Visa Holders of the minorities from the neighbouring countries may purchase one residential property for self-occupation and only one other immovable property for self-employment. The declaration of the source of funds along with the registration documents are to be submitted to the Revenue Authority of the district. Sale of any such property is permissible only after obtaining citizenship of India.
The applicable tax and other duties/levies in India shall be applicable for purchase of immovable property.
Conclusion: Navigating the intricacies of NRI property acquisition in India involves understanding permissions, payment methods, gifting, inheritance, joint purchases, cancellations, loans, renting, and specific rules for long-term visa holders. Compliance with applicable taxes and duties is crucial for a smooth property purchase process.
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In case you as a NRI/PIO have any concern or need any clarity regarding the purchase/transfer of residential/commercial property or FEMA, you may like to contact us.
Abhinarayan Mishra, FCA, FCS, LL.B, IP, RV ; Managing Partner, KPAM & Associates, Chartered Accountants +9910744992, [email protected]
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