Who Is a Non – Resident Indian(NRI)?
An Indian citizen who stays abroad for employment/carrying on business or vocation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad is a non-resident. (Persons posted in U.N. organizations and officials deputed abroad by Central/State Governments and Public Sector undertakings on temporary assignments are also treated as non-temporary assignments are also treated as non-residents). Non-resident foreign citizens of Indian origin are treated on par with non- resident Indian citizens (NRIs).
What Are The Provisions If The Non-Resident Indian Has To Sell His Flat ? Is The Permission of Reserve Bank Necessary ?
No permission is required from the Reserve Bank of India for sale of immovable property in India.
What Are The Provisions Regarding The Estate Duty on Taxes ?
Estate Duty has now been abolished for deaths occurring on or after March 16, 1985 and therefore, will not be applicable in such case.
Who Is a PIO?
A person of Indian origin means an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan) who:
• held an Indian Passport at any time, or
• who or whose father or paternal grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955
What Are The Facilities Available For NRIs/OCBS?
NRIs/OCB’s are granted the following facilities:
1. Maintenance of bank accounts in India
2. Investments in securities/shares of, and deposits with, Indian firms/companies
3. Investments in immovable properties in India
Who Can Purchase Unmovable Property In India?
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 SriLanka 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.
Can NRI’s Acquire or Disopose Residential Property By Gift?
Yes, the Reserve Bank has granted general permission to NRI’s to acquire or dispose of NRI India Properties by way of gift from or to a relative who may be an Indian citizen or a person of Indian origin (PIO) whether resident in India or not.
Can NRI’s Purchase Commercial Property In India?
Yes, under the general permission granted by the Reserve Bank, property other than agricultural land/farm house/plantation property can be acquired by NRIs provided the purchase consideration is met either out of inward remittances in foreign exchange through normal banking channels or out of funds from the purchaser’s NRE/FCNR accounts maintained with banks in India and a declaration is submitted to the Central Office of Reserve Bank in form IPI 7 within a period of 90 days from the date of purchase of the property/final payment of purchase consideration.
Can NRI’s Obtain Loan For Purchasing House?
The Reserve Bank has granted some general permission to certain financial institutions providing housing finance e.g. HDFC, LIC Housing Finance Ltd., etc, and authorized dealers to grant housing loans to NRI nationals for acquisition of a NRI house/flat for self-occupation subject to certain conditions. Criteria regarding the purpose of the loan, margin money and the quantum of loan will be at par with those applicable to resident Indians. Repayment of the loan should be made within a period not exceeding 15 years, out of inward remittance through banking channels or out of funds held in the investors’ NRE/FCNR/NRO accounts.
What Way The Non-Resident Indian Can Finance Purchase Of The Flat ?
The purchase of the flat can be financed from the fresh remittance through the normal banking channels or from payment from NRE / FCNR / NRO accounts. The Non-residents Indians can now avail of the facilities offered by the Housing Development Finance Corporation (HDFC) to own a house in any major city in India, under what is called as “Non-resident Certificate of Deposit” (NRCD) Scheme. HDFC offers to the non-residents Indians some valuable benefits such as allocating of house/flats constructed by. HDFC Developers Limited (the wholly owned subsidiary of HDFC) or flats obtained by HDFC on a preferential basis from reputed builders, a housing loan on priority basis as per HDFC lending policy and a periodical newsletter informing house purchase opportunities available in major cities in India. Non-residents Indians who are citizens of India (India Passport holders) are eligible for housing finance for the acquisition of an immovable property or construction of a new house or a flat for their occupation or for that of their family in India.
What Are The Deductions Allowed From The Income From The House Property ?
Deductions in respect of income from house property include the following:
Taxes levied by a local authority in respect of the property, to the extent borne by the owner, in respect of property let out in rent.
Annual value upto Rs. 3,600 per year, for five years, in the case of a residential unit in a new building comprising one or more residential units, where erection is completed after March 31, 1982 and the property is not in the occupation of the owner.
What Are The Provisions Regarding Payment of Stamp Duty And Registration Charges?
Stamp Duty, registration fee and other expenses for the purpose of transfer of such house property to the assessee. Certain payments are not entitled to the deductions such as:
Admission fee, cost of. share and initial deposit paid for
Becoming shareholder of a Company or member of a Co-operative Society.
Cost of land, unless the cost of the land and house property is a composite amount and the cost of the land alone cannot be separately ascertained.
Cost of addition/alteration/renovation/repair of house property after the completion certificate of the house is issued by the competent authority or after it has been occupied by the assessee or other person on his behalf, or been let out.
What Wealth Tax Is Payable In Respect of The Flat ?
One house if included in the exemption limit of Rs. 5 lacs which is available along with certain other assets under the Wealth Tax Act. In addition, there is a basic exemption limit of 2.5 lacs for wealth tax purpose.
Since The Non-Resident Indians Are Staying Abroad Can The Property Be Purchased Through The Agent or Through The Power of Attorney ?
The non-resident Indians who are staying abroad may enter into an agreement through their relatives and/or by executing the Power of Attorney in their favor as it is not possible for them to be present for completing the formalities of purchase. Power of Attorney should be executed on the stamp paper before the proper authorities in foreign countries. Power of Attorney cannot be drafted on the stamp paper bought in India.
In What Circumstance The Indian National, Residents Outside India Do Not Require Permission From The Reserve Bank of India For Purchase or Sale of Immovable Property ?
Indian nationals resident outside India do not require any permission from the Reserve Bank of India for purchase or even sale of immovable properties in India provided purchase or sale consideration is settled in a manner which does not violate foreign exchange control regulation in India. Thus properties may be acquired in India either by remittance of funds from abroad through normal banking channels or by payments from purchasers. Ordinary Non-resident Account/Non-Resident (External) Account/National Defense Remittance Scheme Special Account with bank in India. When the property has been acquired in India, income thereon as well as sale proceeds of the property sold at a later date can be repatriated upto US $ one million per year from NRO account.
What Are The Provisions Regarding Income From Flat Acquired In India ? Can The Sale Proceeds Be Permitted To Be Transferred Abroad ?
The income from property acquired in India, and the sale proceeds where it is sold at a later date, will not be permitted to be repatriated abroad even if the purchase of the property had been through foreign exchange remitted to India from abroad or out of an NRE account.
The sale agreement may be signed by the buyer and the seller or by the person holding his power of Attorney. A “No objection Certificate” will have to be obtained from the Income Tax Authority in case the value exceeds Rs. 10 Lacs. The Government has a right to purchase the property. In the case of a Co-operative Society, the shares will have to be transferred in the name of the buyer. The sales proceeds received should, be carefully dealt with from the point of view of capital gains.