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Acquisition and Transfer
of Immovable Property in India by a person resident outside India
Frequently
Asked Questions (FAQs)
1. 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.
(VI) Other issues.
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.
Q.40. If a foreign national is a person resident in India as
per the provisions of Section 2(v) (i)B of the FEMA, 1999, does he
require approval of Reserve Bank to purchase any immovable property
in India ?
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.
Sources :
Reserve Bank Of India |
