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.

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.

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.

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.

 

i.e. by a NRI / PIO / foreign national of non-Indian origin through -
i) purchase
ii) gift
iii) inheritance

i) sale
ii) gift
iii) mortgage

i)  purchased
ii) received as gift
iii) inherited

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.

 

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.

 

No.   An NRI / PIO who has purchased residential / commercial property under  general permission, is not required to file any documents with the  Reserve Bank.

 

There are no restrictions on the number of residential / commercial properties that can be purchased.

 

No.

 

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

 

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

 

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.

 

(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.

 

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.

 

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.

 

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.

 

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)

 

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.

 

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.

 

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).

 

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.

 

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.

 

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) 

 

Yes.

Yes, sale proceeds of not more than two residential properties can be repatriated.

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.

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. 

 

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.

 

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].

 

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.

 

The sale proceeds may be credited to NRO account.

 

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.

Yes, they may continue to hold the immovable property. However, they  can transfer the property only with the prior approval of Reserve Bank.

 

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

Section 2 (v) and Section 2 (w) of the FEMA, 1999 defines 'person  resident in India' and a 'person resident outside India' respectively.

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.

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)

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 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.