Home Land Continues to Attract NRIs for Investment

News Posted - 2010-05-15

The Indian economy has emerged as one of the most robust economies of the world, as was evident during the recent global meltdown. Despite the difficult times, investments in our home land continue to be lucrative to Non Resident Indians (NRI). Funds invested in India not only yield higher returns when compared to investments in the US or other European nations, but also gives a sense of security to the investor. The private sector, characterised by its dynamic and competitive nature, has been a key driver for the economic growth witnessed by India in recent times and presents considerable scope for foreign investment.

The Foreign Exchange Management Act, 1999 (FEMA) defines NRI as a person resident outside India who is an ‘Indian citizen’ or a ‘Person of Indian Origin’ (PIO). FEMA broadly regulates matters related to NRI investments viz., investment in immovable property, foreign exchange, bank deposits, government bonds, investment in shares, units, securities, and foreign direct investment in India. However, due consideration should be given to Income-tax implications on income generated from investments in India and to Reserve Bank of India (RBI) regulations.

The purchase consideration should be met either out of inward remittances in foreign exchange through normal banking channels or out of funds from the accounts maintained in India as mentioned above. NRIs can also avail loans from commercial banks for purchase of immovable property. General approval has been granted by RBI to financial institutions for granting loans to NRIs. Repayment of loans can be made out of the NRE/NRO/FCNR accounts maintained in India.

NRIs are also allowed to transfer immovable properties to an Indian resident, NRIs or PIOs. There is no lock-in period for sale of residential/commercial property. Further, NRIs can remit abroad an amount up to $1 million per year from the sale of immovable property in India, subject to certain conditions. NRIs are also allowed to gift any residential/commercial property in India to a person resident in India or to an NRI or PIO subject to certain exceptions. Long term capital gains on transfer of immovable property are subject to 20 percent tax rate whereas the short term capital gains are subject to tax at the applicable individual slab rates. Source: Indianrealtynews 15/5/10

NRIs Permitted to buy and sell properties in india

Non-resident Indians (NRIs) are permitted to buy and sell property in India. The acquisition and transfer of immovable property by NRIs should be in accordance with the Foreign Exchange Management Act (FEMA).

The property should be purchased through a registered conveyance deed. In case the property is purchased on the basis of a Power of Attorney, an agreement to sell and the Power of Attorney should be executed by the seller in favour of the buyer.

However, they are not formally registered with the office of the registrar. As such, no stamp duty is to be paid for the purchase.

The Reserve Bank of India (RBI) has granted permission to foreign citizens of Indian origin, whether resident in India or abroad, to purchase property in India for residential or commercial purposes.

The purchase consideration should be met either out of inward remittances in foreign exchange through normal banking channels or out of funds from NRE/FCNR accounts maintained with a bank in India.

Foreign citizens of Indian origin, purchasing residential property in India under the general permission are required to file a declaration with the central office of the RBI at Mumbai within a period of 90 days from the date of purchase of the property or final payment of purchase consideration along with a certified copy of the document evidencing the transaction and bank certificate regarding the consideration paid.

The RBI has granted general permission for such a sale. However, where the property is purchased by another foreign citizen of Indian origin, funds towards the purchase consideration should either be remitted to India or paid out of a NRE/FCNR account.

The RBI has granted general permission to let out a property in India. The rental income is eligible for repatriation.

The RBI has also granted general permission to certain financial institutions providing housing finance and authorised dealers to grant housing loans to NRIs for acquisition of a house for self-occupation subject to certain conditions.

The purpose of the loan, margin money and the quantum of loan will be at par with those applicable to housing loans for residents.

Repayment of the loan should be made within a period not exceeding 15 years out of inward remittances or out of funds held in a NRE, FCNR or NRO account.

In addition to these, properties other than agricultural land, farm houses, an plantations can be acquired by foreign citizens of Indian origin provided the purchase consideration is met either out of inward remittances in foreign exchange through normal banking channels or out of funds in a NRE or FCNR account maintained with a bank in India.

A declaration is to be submitted to the central office of the RBI within a period of 90 days from the date of purchase of the property or final payment of purchase consideration. They can also dispose off such properties.

The RBI has also granted general permission to foreign citizens of Indian origin to acquire or dispose off properties - up to two houses - as gift from or to a relative who may be an Indian citizen or a person of Indian origin whether resident in India or not, subject to compliance with applicable tax laws.

The RBI also permits non-resident persons (foreign citizens) of Indian origin to transfer as gift property held by them in India to relatives and charitable organisations subject to the condition that the provisions of any other law, including the Foreign Contribution (Regulation) Act 1976 are complied with.

Source1 : Ashish Gupta, TNN, Source 2 panindiaproperties.blogspot.com