NRI real estate investment FAQ
5/26/2020 6:08:00 PM
"1. Who is a NRI?
NRI is a citizen of india, who is holding an indian passport and temporarily residing abroad for employment residence, education or any other purpose or stays abroad
under circumstances indicating an intention for an uncertain duration of stay abroad is a non-resident. Non-resident foreign citizens of Indian Origin are treated at par with
Non Resident Indian (NRIs).
2. Who is a PIO?
A Person of indian origin who is a citizen of another country, holds passport of another country and is not being a citizen of Pakistan,Bangladesh, Sri Lanka, Afghanistan,
China, Iran, Nepal and Bhutan.
(a) He/She at any time, held a Indian passport, or
(b) Self or either parents, grandparents, great grandparents or spouse was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).
3.Who is an OCI?
(a) Any person of full age and capacity:
(i) Who is a citizen of another country and holds passport of another country but was a citizen of India at the time of, or at any time after, the commencement of the
constitution, or
(ii) Who is a citizen of another country, but was eligible to become a citizen of India at the time of the commencement of the constitution,
or
(iii) Who is a citizen of another country,and holds passport of another country but belongs to a territory that became part of India after the 15th Day of August, 1947.
(iv) Who is a child of such a citizen, or
(b) A person, who is minor child of a person mentioned in clause
(a) Provided that no person, who is or had been a citizen of Pakistan, Bangladesh shall be eligible for registration as an Overseas Citizen of India.
4.General Documents required for buying property Pan card OCI/PIO card (In case of OCI/PIO) Passport (In case of NRI) Passport size photographs Address proof
5.Which categories can purchase immovable property in India? Under the general permission of RBI, the following categories can purchase immovable property in
India:
a) Non-Resident Indian
b)Person of indian origin
c)Overseas citizenship of india The general permission, however, covers only purchase of residential and commercial property, and not for purchase agricultural
land/plantation property/farm house in India, such proposals will require specific approval.
5)Can a NRI/PIO acquire agricultural land/plantation property/farm house in India?
Since general permission is not giving permission to NRI/PIO to acquire agricultural land/plantation property/farm house in India, such kind of proposals will require specific
approval of Reserve Bank and the proposals are considered in consultation with the Government of India.
6)What is the Tax treatment for income generated from property selling or renting in india for NRI/ PIO/OCI?
The acquisition of property does not attract income tax. However, any income accruing from the ownership of it, in the form of rent (if it is let out)/annual value of the house
(if is not let out and it is not the only residential property owned by that person in India) and/or capital gains (short term or long term) arising on the sale of this house or part
thereof is taxable in the hands of the owner.
7). Do NRI/PIO/OCI have to file return in India for rental income from property in india and Capital Gains Tax?
The Government of India has granted general permission to NRI/PIO/OCI to buy property in India.These categories do not have to pay tax on mere acquiring property in
india, but if they are selling this property, the profit on sale will be subject to capital gains.The gain can be short term capital gain or long term capital gain.If the property
held for less than or equal to 3 years after taking actual possession then the gains would be short term capital gains, which are to be included in their total income as tax as
per the normal slab rates shall be payable and if the property held for more then 3 years then the resultant gain would be long term capital gains subject to 20% tax plus
applicable cess.Property Rental income is taxable in India, and they will have to obtain a PAN and file return of income if they rented this property.
8)How does the Double Taxation Avoidance Agreement work in the context of tax on income and Capital Gains tax paid in India by NRI? India has DTAA’s with several
countries which give a favorable tax treatment in respect of certain heads of income. However, 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.
9)How does Double Taxation Avoidance Agreement work in the context of CGT paid in India on the foreign tax treatment? 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.
10)What are the rules governing the repatriation of the proceeds of sale of immovable properties by NRI/PIO as prescribed by the Reserve Bank of India?
(a) 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:
(i) In foreign exchange received through normal banking channel or
(ii) 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’s/PIO’s 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’s/PIO’s 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/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. The NRI/PIO may use this facility to remit capital gains, where the acquisition of the subject property was made by funds sourced by
remittance through normal banking channels/by debit to NRE/FCNR(B) account.
11) Is the rental income from acquired property in india is repatriable and what are the RBI rules?
Being a current account transaction,a rental income, is repatriable, subject to the appropriate deduction of tax and the certification thereof by a Chartered Accountant in
practice. Repatriation of sale proceeds is subject to certain conditions. The amount of repatriation cannot exceed the amount paid for acquisition of the immovable property
in foreign exchange.
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