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NRI Section

Today NRIs are looking towards returning to India for investments, as India’s economy booms and continues to maintain a steady 8 per cent GDP growth. Most non-resident Indians (NRIs) and persons of Indian origin (PIOs) with dollar / pound / dirham incomes that translate into mega Indian Rupees, no doubt, wish to splash those thick wads of notes on buying a house in India for themselves, or their family. Yet, there is a slight hesitation as generally, NRIs/PIOs are not clear about India’s foreign exchange regulations and how to go about investing in residential property in India with funds remitted from overseas under them, so to avoid that confusion some related FAQ’s are as given below:

Q1: Who are NRIs/PIOs?

Ans: First, it is important to understand how the law defines an NRI. NRI is the term used for an Indian citizen who resides outside India. PIO refers to an individual (except citizens of select countries, such as, Pakistan, China and Bangladesh), who at any time held an Indian Passport, or whose father or grandfather was a citizen of India./

Q2: What can they buy?

Ans: NRIs and PIOs are legally permitted to acquire immovable property in India, other than agricultural land, a plantation or a farm house.

Q3: What money can an NRI / PIO use for buying real estate in India?

Ans: An NRI / PIO can use his own funds to acquire immovable property, or even take a housing loan for the purpose.

Q4: What are own funds?

Ans: Own funds are funds an NRI receives in India by way of inward remittance from overseas, out of income earned overseas or personal savings outside India, or funds held in non-resident external (NRE) or non-resident ordinary (NRO), or foreign currency (non-resident) (FCNR) bank account for purchasing real estate in India.

Q5: How are housing loans taken out and to be repaid by NRIs / PIOs?

Ans: Authorised banks are permitted to provide housing loans to NRIs / PIOs for acquiring residential accommodation inIndia, subject however, to certain conditions. The quantum of loans, margin money and the period of repayment is at par with the housing loans provided to residents in India; the loan amount cannot be credited to the NRE / FCNR account; it has to be fully secured by equitable mortgage of the property proposed to be acquired, and if necessary, also by lien on the NRI’s / PIO’s other assets in India; the instalment of loan and interest and other charges has to be paid by the NRI / PIO by remittances from outside India through normal banking channels, or out of funds in the NRE/FCNR/NRO account in India. In the last case, the loan and interest can also be repaid out of the rental income of such property.

Q6: Can NRIs / PIOs earn rental income from real estate purchased in India?

Ans: If, property so acquired is not used for their own occupation, it can be let out for earning rental income that is credited into an NRO / NRE account.

Q7: Can NRIs / PIOs transfer property?

Ans: An NRI is permitted to transfer such property to any person residing in India, or even to another NRI or PIO, without any approval from the Reserve Bank of India.

Q8: Can NRIs / PIOs repatriate rental income or sale proceeds of their Indian real estate?

Ans: The remittance of the sale proceeds depends upon the mode of acquisition i.e. whether, it was acquired out of funds remitted from outside or out of rupee funds. A property can be acquired out of rupee funds by the NRI before leaving Indiaor acquired after leaving India, but from the savings bank account in an Indian bank out of income earned in India.

Q9: What is the property is bought from funds remitted from overseas?

Ans: Proceeds can be repatriated provided the amount does not exceed, either the amount paid for acquiring the immovable property in foreign exchange received from overseas, or the amount paid from an FCNR account; or the foreign currency equivalent of the amount paid from funds held in an NRE account for acquisition of the property.

It is also important to note that in respect of residential property, NRIs / PIOs can remit sale proceeds outside India for up to two such properties without any RBI approval. Remittance for a third and subsequent residential property requires prior approval from the RBI.

Q10: How can sales proceeds for property acquired from rupee funds held in India be repatriated?

Ans: Rules relating to this are dependant on period the property has been held by the NRI / PIO. For immovable property that has been held for more than 10-years, up to $1 million can be repatriated per calendar year without seeking RBI approval, if the funds have been held in an NRO account.
If, the holding period of such property is less than 10-years and it is sold, remittances can be made only if the sale proceeds have been held for the balance period in an NRO account or other eligible investments. In respect of remittance of sale proceeds of assets acquired by way of inheritance, or legacy, or settlement, no lock-in-period is there. In all other cases, specific approval of the RBI is required.

Q11: What is the procedure for remittances through normal banking channels?

Ans: It is pertinent to note that, wherever specific approval of RBI is not required, the sale proceeds of residential property, as well as, rental income may be remitted outside India through normal banking channels, after obtaining an appropriate certificate from a chartered accountant certifying that applicable taxes have been paid / provided for.

NRIs / PIOs can now acquire a dream house in India for their own use, or for renting out, or even transfer, or sell the same, if necessary. Subject to foreign exchange regulations, they are now allowed to take rental income and investment in residential property outside India in a hassle-free manner.
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