NRI's

Do NRI require permission of Reserve Bank to acquire immovable property in India?

No. NRI's do not require any permission to acquire any immovable property in India other than agricultural / plantation property or a farm house.

Do NRI's require permission of Reserve Bank to transfer immovable property in India?

No. NRI do not require any permission to transfer any immovable property in India. Permission is required only in the case of transferring of agricultural or plantation property or farm house to another citizen of India NRI or PIO.

Do PIO require permission of Reserve Bank to purchase immovable property in India for their residential use?

Reserve Bank has granted general permission to foreign citizens of Indian origin, whether resident in India or abroad, to purchase immovable property other than agricultural land/farm house/plantation property, in India. They are, therefore, not required to obtain separate permission of Reserve Bank or file any declaration.

Can such property be sold without the permission of Reserve Bank?

Yes. Reserve Bank has granted general permission for sale of such property. However, where another foreign citizen of Indian origin purchases the property, funds towards the purchase consideration should either be remitted to India or paid out of balances in non-resident accounts maintained with banks in India.

Can NRI/PIO rent out the properties (residential/commercial) if not required for immediate use?

Yes. Reserve Bank has granted general permission for letting out any immovable property in India. The rental income or proceeds of any investment of such income is eligible for repatriation

Can NRI obtain loans for acquisition of a house/flat for residential purpose or office/showroom for commercial purpose from financial institutions providing housing finance?

Reserve Bank has granted general permission to certain financial institutions providing housing finance e.g. HDFC, LIC Housing Finance Ltd., etc., to grant housing loans to NRI for acquisition of a house/flat for self occupation subject to certain conditions. The purpose of loan margin money and the quantum of loan will be at par with those applicable to housing loans to residents. Repayment of loan should be made within a period not exceeding 15 years out of inward remittances or out of funds held in the investor's NRE / FCNR / NRO Accounts.

Can NRI/ PIO's acquire or dispose residential property by way of gift?

Yes, NRIs and PIOs can freely acquire immovable property in India by way of gift either from

person resident in India 

NRI

PIO However the property can only be commercial or residential. Again NRIs and PIOs may gift residential/ commercial property to

person resident in India 

NRI

PIO

Foreign national of non Indian origin - with approval of RBI

Tax implications for NRIs upon sale of real estate property.

Non-Resident Indians (NRI) constitutes a significant portion of buyer percentage when it comes to real estate transactions in India. Irrespective of constituting a considerable portion, they still face a lot of hassles in the process of taxation when buying or selling properties.

“Sale of the flat will give rise to long-term capital gains which are taxed at 20 per cent, plus applicable surcharge and education cess. There are few important points that one should take a note of by your client.”

Find below the details:

The taxpayer would be eligible for indexation benefit. This means that the cost of the house would be multiplied by the cost inflation index of the year of sale and would be divided by the cost inflation index for the year of purchase. These indices are notified by the income tax department every year. This would result in an increased cost of the house for calculation of capital gains and would result in lowering the amount of long-term capital gains

While calculating the amount of long-term capital gain, s/he can claim a deduction on the expenses related to sale such as brokerage fees, travel expenses, etc.

The taxpayer can claim exemption from the long-term capital gains by reinvesting in another house in India. The amount of deduction is lower of the cost of the new house and the amount of long-term capital gain. Therefore, if the cost of new house is equal to or more than the amount of long term capital gains, the entire gains are exempt from income tax The new house should be purchased either within 2 years from the date of sale of the old house or within a year before the date of sale of the old house. Further, if such investment cannot be made by the due date for filing the tax return for the year of sale, the amount should be invested in a capital gains deposit scheme with a nationalized bank. The balance in the account can be utilized for making the payments towards the purchase of the house within the stipulated period

Alternatively, the taxpayer can claim an exemption by investing in capital gains tax saving bonds. Investment in such bonds should be made within 6 months from the date of sale of the house. The amount of exemption is lower of the amount invested in bonds and the amount of long-term capital gains. The maximum amount which can be invested in the bonds is restricted to Rs 50 lakhs. The bonds are locked in for a period of 3 years and carry interest @ 6 per cent per annum. Interest on the bonds is taxable

The taxpayer being a non-resident may suffer a TDS of around 23 per cent on the transaction value. An application can be made with the income tax department for a lower or nil rate of TDS

The taxpayer should check the income tax implications in the country of his residence. Countries such as US, Australia, Canada, etc. require their residents to pay income tax on their worldwide income. And in case the taxpayer is liable to pay income tax in the country of residence a) he would receive a credit of income tax paid in India on such gains, and b) In most cases, he is better off paying income taxes in India rather than claiming exemption by reinvesting in bonds or another house