Acquisition and Transfer of
Immovable Property in India by a person resident outside India
Frequently Asked Questions (FAQs)
Acquisition and Transfer of Immovable Property in India by a Person Resident outside India
Acquiring immovable property in India by persons resident outside India is regulated in terms of Section 6(3) (i) of the Foreign Exchange Management Act (FEMA), 1999 as well as by the regulations contained in Notification issued by RBI viz Notification No FEMA. 21/2000-RB dated May 3, 2000, as amended from time to time. The persons resident outside India are categorized as Non- Resident Indians (NRIs) or a foreign national of Indian Origin (PIO) or a foreign national of non-Indian origin. A person resident in India who is not a citizen of India is also covered by the relevant Notifications.
2. Statutorily, under the provisions of Section 6(5) of FEMA 1999, a person resident outside India can hold, own, transfer or invest in Indian currency, security or any immovable property situated in India if such currency, security or property was acquired, held or owned by such person when he was a resident in India or inherited from a person who was a resident in India.
3. The regulations under the Notification No FEMA 21 dated May 3, 2000 permit a NRI or a PIO to acquire immovable property in India other than agricultural land or, plantation property or farm house. Further, foreign companies who have been permitted to open an office in India are also allowed to acquire any immovable property in India, which is necessary for or incidental to carrying on such activity. This stipulation is not available to entities which are permitted to open liaison offices in India.
4. The relevant regulations covering the transactions in immovable property have been notified vide RBI Notification No.FEMA 21/2000-RB dated May 3, 2000 and this basic notification has been subsequently amended by the notifications detailed below:
1.
Notification No.FEMA 64/2002-RB dated June 29, 2002;
2.
Notification No.FEMA 65/2002-RB dated June 29, 2002;
3.
Notification No.FEMA 93/2003-RB dated June 9, 2003; and
4.
Notification No. FEMA 146/2006-RB dated February 10 2006 (available
with
A.P.(DIR Series) Circular No. 5 dated 16.8.2006 on website)
All the above notifications are available on RBI website: www.fema.rbi.org.in.
5. The restrictions on acquiring immovable property in India by a person resident outside India would not apply where the immovable property is proposed to be acquired by way of a lease for a period not exceeding 5 years or where a person is deemed to be resident in India. In order to be deemed to be a person resident in India, from FEMA angle, the person would need to comply with the criterion for residency as defined in Section 2(v) of FEMA 1999. However, citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan cannot acquire or transfer immovable property in India, (other than on lease, not exceeding five years) without prior permission of the Reserve Bank.
6. NRIs/PIO are allowed to repatriate an amount up to USD one million, per financial year (April-March), out of the balances held in the NRO account subject to tax compliance. This amount includes sale proceeds of assets acquired by way of inheritance or settlement.
7. While the statutory and regulatory provisions are indicated above, we have been receiving several queries from individuals on operational procedures regarding acquisition, holding and transferring of immovable property in India and repatriating/remitting the proceeds arising from sale of such property. In order to clarify these issues, we have attempted a set of FAQs on various issues relating to acquisition and transfer of immovable property in India by a person resident outside India and a person resident in India who is not a citizen of India.
In case there
are other issues to be resolved, a reference may be made to the
Chief General Manager-in-Charge,
Foreign Exchange Department
Foreign Investment Division,
Reserve Bank of India,
Central Office
Mumbai- 400 001.
The FAQs cover the following topics:
(I) Acquisition of immovable property in India by a person resident
outside India
i.e. by a NRI / PIO / foreign national of non-Indian origin through -
i) purchase
ii) gift
iii) inheritance
(II) Transfer of immovable property in India by a person resident
outside India by -
i) sale
ii) gift
iii) mortgage
(III) Mode of payment for purchase of property in India.
(IV) Repatriation of sale proceeds of property
i) purchased
ii) received as gift
iii) inherited
(V) Provisions for Foreign Embassies / Diplomats / Consulate Generals.
I
Acquisition of Immovable Property in India
Q.1 Who can purchase immovable
property in India?
A.1 Under the general permission available, the following categories can
freely purchase immovable property in India:
i) Non-Resident Indian (NRI)- that is a citizen of India resident
outside India
ii) Person of Indian Origin (PIO)- that is an individual (not being a
citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China
or Iran or Nepal or Bhutan), who
1. at any time, held
Indian passport, or
2. who or either of whose father or grandfather was a citizen of India
by virtue of the Constitution of India or the Citizenship Act, 1955 (57
of 1955).
The general
permission, however, covers only purchase of residential and commercial
property and not for purchase of agricultural land / plantation property
/ farm house in India.
Q.2. Whether NRI/PIO can
acquire agricultural land/ plantation property / farm house in India?
A.2. No. Since general permission is not available to NRI/PIO to acquire
agricultural land/ plantation property / farm house in India, such
proposals will require specific approval of Reserve Bank and the
proposals are considered in consultation with the Government of India.
Q.3. Do any documents need to
be filed with Reserve Bank of India after purchase?
A.3. No. An NRI
/ PIO who has purchased residential / commercial property under general
permission, is not required to file any documents with the Reserve Bank.
Q.4. How many residential /
commercial properties can NRI / PIO purchase under the general
permission?
A.4. There are no restrictions on the number of residential / commercial
properties that can be purchased.
Q.5. Can a foreign national of
non-Indian origin be a second holder to immovable property purchased by
NRI / PIO?
A.5. No.
Q.6. Can a foreign national of
non-Indian origin resident outside India purchase immovable property in
India?
A.6. No. A foreign national of non-Indian origin, resident outside India
cannot purchase any immovable property in India. But, he/she may take
residential accommodation on lease provided the period of lease does not
exceed five years. In such cases, there is no requirement of taking any
permission of or reporting to Reserve Bank
Q.7 Can a foreign national who
is a person resident in India purchase immovable property in India?
A.7. Yes, but the person concerned would have to obtain the approvals,
and fulfil the requirements if any, prescribed by other authorities,
such as the concerned State Government, etc However, a foreign national
resident in India who is a citizen of Pakistan, Bangladesh, Sri Lanka,
Afghanistan, China, Iran, Nepal and Bhutan would require prior approval
of Reserve Bank. Such requests are considered by Reserve Bank in
consultation with the Government of India.
Q.8 Can an office of a foreign
company purchase immovable property in India?
A.8. A foreign company which has established a Branch Office or other
place of business in India, in accordance with FERA / FEMA regulations,
can acquire any immovable property in India, which is necessary for or
incidental to carrying on such activity. The payment for acquiring such
a property should be made by way of foreign inward remittance through
proper banking channel. A declaration in form IPI should be filed with
Reserve Bank within ninety days from the date of acquiring the property.
Such a property can also be mortgaged with an Authorised Dealer as a
security for other borrowings. On winding up of the business, the sale
proceeds of such property can be repatriated only
with the prior approval of
Reserve Bank. Further, acquisition of immovable property by entities who
had set up Branch Offices in India and incorporated in Pakistan,
Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan would
require prior approval of Reserve Bank to acquire such immovable
property. However, if the foreign company has established a Liaison
Office, it can not acquire immovable property . In such cases, Liaison
Offices, can take property by way of lease not exceeding 5 years.
Q.9 Whether immovable property
in India can be acquired by way of gift ?
A.9. (a) Yes, NRIs and PIOs can freely acquire immovable property by
way of gift either from
i) a person resident in India or
ii) an NRI or
iii) a PIO.
However, the property can only be commercial or residential.
Agricultural land / plantation property / farm house in India
cannot be acquired by
way of gift.
(b) A foreign national of non-Indian origin resident outside India
cannot acquire any immovable property in India through gift.
Q.10. Whether a non-resident
can inherit immovable property in India?
A.10. Yes, a person resident outside India i.e.
i) an NRI
ii) a PIO and
iii) a foreign national of non-Indian origin can inherit and hold
immovable property in India from a person who was resident in India.
However, a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan,
China, Iran, Nepal and Bhutan should seek specific approval of Reserve
Bank.
Q.11.
From whom can the non-resident inherit immovable property?
A.11. A person resident outside India (i.e. NRI or PIO or foreign
national of non-Indian origin) can inherit immovable property from
(a) a person resident in India.
(b) a person resident outside India
However, the person from whom the property is inherited should have
acquired the same in accordance with the foreign exchange regulations
applicable at that point of time.
II.
Transfer of immovable property in India
(i) Transfer by Sale
Q.12 Can
an NRI/ PIO/foreign national sell his residential / commercial property?
A.12. (a) NRI can sell property in India to-
i) a person resident in India or
ii) an NRI or
iii) a PIO.
(b) PIO can sell
property in India to
i) a person resident in India.
ii) an NRI or
iii) a PIO – with the prior
approval of Reserve Bank
(c ) Foreign national of non-Indian origin including a citizen of
Pakistan or Bangaladesh or Sri Lanka or Afghanistan or China or Iran or
Nepal or Bhutan can sell property in India with prior approval of
Reserve Bank to
i) a person resident in India
ii) an NRI
iii) a PIO
Q.13. Can an agricultural land
/ plantation property / farm house in India owned / held by a
non-resident be sold?
A.13. (a) NRI / PIO may sell agricultural land /plantation property/farm
house to a person resident in India who is a citizen of India.
(b) Foreign national of non-Indian origin resident outside India would
need prior approval of
Reserve Bank to sell agricultural land/plantation property/ farm house
in India
(ii) Transfer by gift
Q.14. Can
a non-resident gift his residential / commercial property?
A.14. Yes.
(a) NRI / PIO may gift residential / commercial property to -
(i) person resident in India or
(ii) an NRI or
(iii) PIO.
(b) foreign national of non-Indian origin needs prior approval of
Reserve Bank.
Q.15. Can an NRI / PIO /
Foreign national holding an agricultural land / plantation property /
farm house in India gift the same?
A.15. (a) NRI / PIO can gift but only to a person resident in India who
is a citizen of India.
(b) foreign national of non-Indian origin needs prior approval of
Reserve Bank
(iii)
Transfer through mortgage
Q.16. Can residential /
commercial property be mortgaged?
A.16. i) NRI / PIO can mortgage to:
(a) an authorised dealer / housing finance institution in India –
without the approval of Reserve Bank.
(b) a party abroad - with prior approval of Reserve Bank.
ii) a foreign national of non-Indian origin can mortgage only with prior
approval of Reserve Bank
iii) a foreign company which has established a Branch Office or other
place of business in accordance with FERA/FEMA regulations has general
permission to mortgage the property with an authorized dealer in India.
III. Mode of payment for
purchase
Q.17. How
can an NRI / PIO make payment for purchase of residential / commercial
property in India ?
A.17. Payment can be made by NRI / PIO out of
(a) funds remitted to India through normal banking channel or
(b) funds held in NRE / FCNR (B) / NRO account maintained in India
No payment can be made either by traveller’s cheque or by foreign
currency notes.
No payment can be made outside India.
Q.18 What
shall be the option if there is refund of application money / payment
made by the building agencies / seller because of non-allotment of flat
/ plot / cancellation of bookings / contracts ?
A.18. The amount of refund, together with interest (net of income tax)
can be credited to NRE account. This is subject to condition that the
original payment was made by way of inward remittance or by debit to NRE
/ FCNR (B) account. (Please refer to
A.P. (DIR) Series Circular No. 46 dated 12.11.2002)
Q.19. Can NRI / PIO avail of
loan from an authorised dealer for acquiring flat / house in India for
his own residential use against the security of funds held in his NRE
Fixed Deposit account / FCNR (B) account?
A.19. Yes, such loans are subject to the terms and conditions as laid
down in Schedules 1 and 2 to Notification No. FEMA 5/2000-RB dated May
3, 2000 as amended from time to time. However, banks cannot grant fresh
loans or renew existing loans in excess of Rupees 20 lakh against NRE
and FCNR(B) deposits either to the depositors or to third parties [cf.
A.P. (DIR Series) Circular No. 29 dated January 31, 2007].
Such loans can be repaid
(a) by way of inward remittance through normal banking channel or
(b) by debit to his NRE / FCNR (B) / NRO account or
(c) out of rental income from such property.
(d) by the borrower's close relatives, as defined in section 6 of the
Companies Act, 1956, through their account in India by crediting the
borrower's loan account.
Repatriation:
(a). In case
the amount has been received from inward remittance or debit to NRE/FCNR(B)/NRO
account for acquiring the property or for repayment of the loan, the
principal amount can be
repatriated outside India.
For this purpose, repatriation
outside India means the buying or drawing of foreign
exchange from an authorised dealer in India and remitting it outside
India through normal banking channels or crediting it to an account
denominated in foreign currency or to an account in Indian currency
maintained with an authorised dealer from which it can be converted in
foreign currency
(b) in case the property is acquired out of Rupee resources and/or the
loan is repaid by close relatives in India ( as defined in Section 6 of
the Companies Act, 1956), the amount can be credited to the NRO account
of the NRI/PIO. The amount of capital gains, if any, arising out of sale
of the property can also be credited to the NRO account.
NRI/PIO are also allowed by the Authorised Dealers to repatriate an
amount up to USD 1 million per financial year out of the balance in the
NRO account for all bonafide purposes to the satisfaction of the
authorised dealers, subject to tax compliance.
Q.20. Can NRI / PIO, avail of
housing loan in rupees from an authorised dealer or housing finance
institution in India approved by the National Housing Bank for purchase
of residential accommodation or for the purpose of repairs / renovation
/ improvement of residential accommodation ? How can such loan be
repaid?
A.20. Yes, NRI/PIO can avail of
housing loan in rupees from an
Authorised Dealer or housing finance institution subject
to certain terms and conditions. (Please refer to Regulation 8 of
Notification No. FEMA 4/2000-RB dated 3.5.2000 and
A.P. (DIR) Series Circular No. 95 dated April 26, 2003).
Such a loan
can be repaid
(a) by way of inward remittance through normal banking channel or
(b) by debit to his NRE / FCNR (B) / NRO account or
(c) out of rental income from such property.
(d) by the borrower's close relatives, as defined in section 6 of the
Companies Act, 1956, through their account in India by crediting the
borrower's loan account.
Q.21. Can
NRI/PIO avail of housing loan in rupees from his employer in India?
A.21. Yes, subject to certain terms and conditions (Please refer to
Regulation 8A of
Notification No. FEMA 4/2000-RB dated May 3, 2000 and
A.P. (DIR Series) Circular No.27 dated October 10, 2003).
IV Repatriation of sale proceeds of residential / commercial property purchased by NRI / PIO
Q.22. Can
NRI / PIO repatriate the sale proceeds of immovable property? If so,
what are the terms?
A.22. NRI / PIO may repatriate the sale proceeds of immovable property
in 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:
1. in foreign
exchange received through normal banking channel or
2. 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 / PIO 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/PIO 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 or 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.
Q.23. Can
an NRI/PIO repatriate the proceeds in case the sale proceed was
deposited in NRO account?
A.23. From the NRO account, NRI/PIO may repatriate up to USD one million
per financial year (April-March), which would also include the sale
proceeds of immovable property.
Q.24. If a Rupee loan was taken
by NRI/PIO from Authorised Dealer or housing finance institution for
purchase of residential property can an NRI / PIO repatriate the sale
proceeds of such property?
A.24. Yes, provided the loan has been subsequently repaid by remitting
funds from abroad or by debit to NRE/FCNR(B) accounts (Please see
A.P. (DIR) Series Circular No. 101 dated 5.5.2003)
Q.25. If
the property was purchased from foreign inward remittance or from NRE /
FCNR (B) account, can the sale proceeds of property be repatriated
immediately?
A.25. Yes.
Q.26. Is
there any restriction on number of residential properties in respect of
which sale proceeds can be repatriated by NRI / PIO?
A.26. Yes, sale proceeds of not more than two residential properties can
be repatriated.
Q.27. If
the immovable property was acquired by way of gift by the NRI/PIO, can
he repatriate abroad the funds from sale?
A.27. The sale proceeds of immovable property acquired by way of gift
should be credited to NRO account only. From the balance in the NRO
account, NRI/PIO may remit up to USD one million, per financial year,
subject to the satisfaction of Authorised Dealer and payment of
applicable taxes.
Q.28 If
the immovable property was received as inheritance by the NRI/PIO can he
repatriate the sale proceeds?
A.28. Yes, general permission is available to the NRIs/PIO to repatriate
the sale proceeds of the immovable property inherited from a
person resident in India.
NRIs/PIO may repatriate an amount not exceeding USD one million, per
financial year, on production of documentary evidence in support of
acquisition / inheritance of assets, an undertaking by the remitter and
certificate by a Chartered Accountant in the formats prescribed by the
Central Board of Direct Taxes vide their Circular No.10/2002 dated
October 9, 2002. [cf.
A. P. (DIR Series) Circular No.56 dated November 26, 2002].
In case of a foreign national, sale proceeds can also be repatriated
even if the property is inherited from a
person resident outside India.
But this is allowed only with prior approval of Reserve Bank. The
foreign national has to approach Reserve Bank with documentary evidence
in support of inheritance of the immovable property and the undertaking
and the C.A. Certificate as mentioned above.
The general permission for repatriation of sale proceeds of immovable
property is not available to a citizen of Pakistan, Bangladesh, Sri
Lanka, China, Afghanistan and Iran and he has to seek specific approval
of Reserve Bank.
As FEMA specifically permits transactions only in Indian Rupees with
citizens of Nepal and Bhutan, the question of repatriation of the sale
proceeds in foreign exchange to Nepal and Bhutan would not arise.
V. Provisions for Foreign Embassies / Diplomats / Consulate Generals
Q.29. Can
Foreign Embassies / Diplomats / Consulate General purchase / sell
immovable property in India ?
A.29. Yes, Foreign Embassies / Diplomats / Consulate Generals can
purchase and sell any immovable property other than agricultural
land / plantation property / farm house in India
with prior clearance from the
Government of India, Ministry of External Affairs. The
payment should be made by foreign inward remittance through normal
banking channel.
VI. Other issues
Q.30. Can
NRI / PIO rent out the residential / commercial property purchased out
of foreign exchange / rupee funds?
A.30. Yes, NRI/PIO can rent out the property without the approval of the
Reserve Bank. Rent received can
be credited to NRO / NRE account or remitted abroad.
Powers have been delegated to the Authorised Dealers to allow
repatriation of current income like rent, dividend, pension, interest,
etc. of NRIs/PIO who do not maintain an NRO account in India based on an
appropriate certification by a Chartered Accountant, certifying that the
amount proposed to be remitted is eligible for remittance and that
applicable taxes have been paid/provided for.[cf.
A.P. (DIR Series) Circular No. 45 dated May 14, 2002].
Q.31. Can
a person who had bought immovable property when he was a resident,
continue to hold such property even after becoming an NRI/PIO?
A. 31. Yes, he can continue to hold the residential / commercial
property / agricultural land/ plantation property / farm house in India
without the approval of the Reserve Bank.
Q. 32. In
which account can the sale proceeds of such immovable property be
credited ?
A.32. The sale proceeds may be credited to NRO account.
Q.33. Can
the sale proceeds of the immovable property referred to in Q.No. 31 be
remitted abroad ?
A.33. Yes, provided the amount to be remitted does not exceed USD one
million per financial year, for all bonafide purposes to the
satisfaction of Authorised Dealers and subject to tax compliance.
Q.34. Can
foreign nationals of non-Indian origin resident in India or outside
India who had earlier acquired immovable property under FERA with
specific approval of Reserve Bank continue to hold the same? Can they
transfer such property?
A.34. Yes, they may continue to hold the immovable property. However,
they can transfer the property only with the prior approval of Reserve
Bank.
Q.35. Is
a resident in India governed by the provisions of Foreign Exchange
Management (Acquisition and transfer of immovable property in India)
Regulations, 2000?
A.35. A person resident in India who is a citizen of Pakistan or
Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or
Bhutan is governed by the provisions of Foreign Exchange Management
(Acquisition and Transfer of Immovable Property in India) Regulations,
2000 ie. he would require prior approval of Reserve Bank for acquisition
and transfer of immovable property in India even though he is resident
in India. Such requests are considered by Reserve Bank in consultation
with the Government in India
Definitions
Q.36.Where are the terms a
`person resident in India' and a `person resident outside India' defined
?
A.36. Section 2 (v) and Section 2 (w) of the FEMA, 1999 defines `person
resident in India' and a `person resident outside India' respectively.
Q.37.
What is meant by a person resident in India ?
A.37. Under FEMA, a person resident in India is defined as a person
residing in India for more than one hundred and eighty-two days during
the course of the preceding financial year (April-March) and who has
come to or stays in India either for taking up employment, carrying on
business or vocation in India or for any other purpose, that would
indicate his intention to stay in India for an uncertain period.
In other words, to be treated as `a
person resident in India' under FEMA, a person has not only to satisfy
the condition of the period of stay (being more than 182 days during the
course of the preceding financial year) but has also to comply with the
condition of the purpose / intention of stay.
Q.38.
What is meant by a person resident outside India ?
A.38. The Act defines a 'a person resident outside India' as a person
who is not a person resident in India' (As defined in
Q.No. 37 above)
Q.39. Who can determine whether
a person is resident in India or not?
A.39. Reserve Bank does not determine the residential status. Under FEMA,
residential status is determined by operation of law. The onus is on an
individual to prove his / her residential status, if questioned by any
authority.
A.40 A foreign national resident in India does not require approval from Reserve Bank from FEMA angle, but approvals if any required in terms of regulations prescribed by other authorities such as the concerned State Government etc. will have to be obtained by him / her. However, a foreign national resident in India who is a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan requires specific prior approval of Reserve Bank.
SOURCE: RBI WEBSITE (AS ON 18.01.2010)