As per the Reserve Bank of India (RBI), an NRI/PIO/OCI can freely purchase immovable property including residential and commercial assets. But he cannot purchase agricultural land / plantation property / farm house in India.

Payments can be made through the following:

– Amount remitted to India through normal banking channels, or

– Funds held in NRE / FCNR (B) / NRO accounts maintained in India – these are three kinds of accounts that an NRI can hold with banks in India.

NRE or Non-Resident External Rupee account can be opened by the NRI himself and not through the holder of POA. It can be in the form of Savings, current or recurring, or FD account with a maturity of a minimum of one year.

FCNR or Foreign Currency Non-Resident (Bank) account provides a nomination facility in which the nominee can be a resident of India.

NRO or Non-Resident Ordinary Rupee account can be opened by anybody who is a resident outside India to carry out transactions in rupees. It can be opened in the form of a current, savings recurring, or FD account.

(Note: Payments via traveler’s cheque or by foreign currency notes or by other mode is not permitted in property purchase.)

No, there are no restrictions on the number of residential/commercial properties purchased by an NRI and they are also not required to report details of property transactions to the RBI.

It is recommended that an NRI give the POA to his relative/friend since it makes documentation work easier. When NRIs buy under-construction properties, developers ask for a POA from them to execute all paperwork including contracts, deeds, mortgages, or leases when the NRI isn’t in the country. Also, POA comes in handy in case of selling the property. But, tread with caution! It is always advisable to get the documents run through a professional lawyer.

Important documents needed by NRI/PIO/OCI for property buying

1. Indian passport
2. PIO Card

   – If you hold a passport from any foreign country.

   – If you are a foreign citizen whose father or grandfather was a citizen of India.

3. OCI Card

   – It is required if you are not a citizen of India, but eligible to become an Indian citizen before or after partition.

   (Note: You can apply for these cards in the Indian embassy or consulate in the country of your residence by producing your parent's birth certificate as proof that you are an OCI or PIO.)

4. PAN Card

   A permanent Account Number (PAN) is mandatory to file income tax returns in India in case the property is rented out or sold.

5. Power of Attorney (POA)

   – The person given the POA can get the registration, execution of the sale, possession, and other processes done on your behalf.

6. Others

   Address proof and passport-size photographs.

Any lending institution approved by the National Housing Bank (NHB) can give home loans for buying residential property here. Few Non-Banking Financial Companies (NBFCs) also offer home loans to non-residents provided-

– Loan amount and time for repayment are at par with those applicable for people residing in India.

– Loan amount shall not be credited to Non-Resident External (NRE) or Foreign Currency Non-resident (FCNR) or Non-resident non-repatriable (NRNR) account of the borrower.

– The interest rate on home loans is the same as for regular residents.

– Borrowers can pay installments, interest, and other charges by remittances from outside India through normal banking channels or out of funds in his NRE/FCNR/NRNR/NRO/non-resident special rupee (NRSR) account in India.

– Post-dated cheques can be issued or Electronic Clearance Service (ECS) from NRE, NRO or FCNR account.

– If any rented property was acquired using the home loan route, then the rent amount can also be used to repay the loan. Cheques issued from any relative’s local account can be used to make payments.

(Note: ‘Relative’ as defined in section 6 of the Companies Act, 1956. A person shall be deemed to be a relative of another if (a) they are members of a Hindu undivided family, (b) they are husband and wife; or (c) the one is related to the other in the manner indicated in Schedule IA (Father, mother, son, son’s wife, Daughter, Daughter’s husband, etc.)

Criteria about minimum age and years of work experience abroad should be met but these things vary from bank to bank.

– Salary Criteria: A few banks like ICICI and Axis Bank also have minimum salary per month criteria. For those working in any of the Gulf Cooperation Council (GCC) countries, the minimum monthly income must be 5,000 AED (United Arab Emirates Dirham) while for those in the US and other countries, $3,000 per month is the minimum salary.

– If you are self-employed, then you should have stayed abroad for minimum 3 years.

– Professional and educational qualifications also play a major role. Those applying for loans should be at least graduates.

One should check with their bank or lending agency on compliance with the above norm.

As per the RBI norms, a maximum of 80 percent of the total value of property can be funded by a bank. The remaining 20 percent should come from non-residents' personal resources.

It varies from bank to bank. For instance, HDFC and SBI offer up to 20-30 years while in others it can be restricted to 10-15 years.

Points to Remember

1. Inherited or jointly held property

   – Check title papers carefully.

   – Do a bank release if at any point of time the property was under mortgage.

   – In order to make sure there are no pending dues (water, electricity, or any other), take a no dues certificate from the seller at the time of buying.

2. New Construction

   – Take NOC from the builder.

   – Check the Land title.

   – Once the RERA Act is in force in the region where you plan to purchase property, follow all disclosures made by the builder.

Well, if you are still settled abroad and have income accruing there, you can try to get funding overseas itself.

– Passport and Visa

– PIO/OCI Card

– Appointment letter’s copy and contract from the company employing the applicant.

– The labor card/identity card (translated into English and countersigned by the consulate)

– If the person is employed in the Middle East Salary certificate (in English) specifying name, date of joining, designation, and salary details

– Bank Statements for the last six months

1. List of Classified documents for: Salaried Applicant:

   – Copy of valid passport showing VISA stamps

   – Copy of valid visa/work permit / equivalent document supporting the NRI status of the proposed account holder

   – Overseas Bank A/C for the last 3 months showing salary credits.

   – Latest contract copy evidencing Salary / Salary Certificate / Wage Slips

   – Utility Bills for Address Proof

   – Power of Attorney (POA) – if any

   – Income Tax returns last 2 years

2. Self Employed Non Resident Applicants:

   – Passport copy with valid visa stamp

   – Brief profile of the applicant and business/ Trade license or equivalent document

   – 6 months overseas bank account statement and NRE/ NRO account

   – Computation of income, P&L account, and B/Sheet for last 3 years certified by the C.A / CPA or any other relevant authority as the case may be (or equivalent company accounts).

   – Utility Bills for Address Proof

   – Power of Attorney (POA) – if any

   – Income Tax returns last 3 years

1. In such cases, photocopies of any of the following documents can be used.

   – The current passport, with birthplace as ‘INDIA’

   – The Indian passport, if held by the individual earlier

   – Parents/grandparents Indian passport/birth certificate/marriage certificate substantiating the individuals claim as a person of Indian origin

2. Regulations on the sale of property by Non-Residents

   As per FEMA, a non-resident has the right to sell residential and commercial property bought or even inherited. In the case of selling an inherited agricultural or plantation land or farmhouse, an NRI has to look for a resident Indian to buy it. Such properties can also be gifted to other NRI or a PIO.

3. RBI guidelines on Repatriation of Sale Proceeds

   – As per rules, one can repatriate only up to the amount invested in property.

   – In case the property was bought using foreign exchange sources, then the repatriation cannot exceed the foreign exchange amount paid for the purchase of property through banking channels.

   – If property was acquired using the rupee, one can remit an amount up to USD one million, per financial year. The NRI/PIO may use this facility to remit capital gains, where the acquisition of the subject property was made by funds sourced by remittance through normal banking channels/by debit to the NRE/FCNR (B) account.

   – Repatriation of sale proceeds is restricted to a maximum of two properties.

   – Capital gains, if any, may be credited to the NRO account from where the NRI’s/PIO’s may repatriate an account up to USD one million, per financial year (April to March).

Yes, rental income is repatriable but is subject to an appropriate tax deduction and a certificate from a Chartered Accountant in practice.

Yes, the rent received is taxable and the owners must file tax returns in India. Further, the rent can be additionally taxed in the non-resident's country of residence. However, under the Double Tax Avoidance Agreement (DTAA), one can avail tax relief in certain countries.

– Like in India, municipal taxes and interest paid for homes are deductible. Further, a standard deduction of 30 percent of net rent (gross rent less municipal taxes) can be availed for repair and maintenance, irrespective of actual expenditure.

– Form 15CA is enough in case the remittance limit does not exceed Rs 50,000 per month. However, in certain cases where the amount exceeds this limit, a certificate from a CA in Form 15CB is mandatory before uploading Form 15CA online. (Note: Form 15CB entails details pertaining to the payment, TDS rate, and deduction as per Section 195 of the Income Tax Act. It also has details of DTAA, i.e. Double Tax Avoidance Agreement, if applicable.)

Under Section 80C, principal on home loans, stamp duty, and registration charges are allowed as deductions with a maximum limit of Rs 1.5 lakh per year.

A vacant property, i.e. not rented out, is considered as a self-occupied property for which the taxable value is nil. For the same, one can avail deduction on interest paid on a home loan which is up to Rs 1.5 lakh per year. Deduction for principal repayment can also be obtained.

If a property is rented for more than 300 days, an non-resident is exempted from wealth tax. Further, a vacant house declared as self-occupied is also exempted. However, wealth tax is applicable on second or subsequent properties at the rate of 1 percent on the value of more than Rs 30 lakh.

Like Indian residents, non-residents are also subject to capital gains tax in India. For a property held over 3 years, they can get long-term capital gains. For the same, non-residents can claim exemptions under Section 54, Section 54EC and Section 54F. Long-term capital gains are taxed at 20 percent and are also subjected to a TDS of 20 percent.

Again, in this case, also, capital gains may be taxable in non-residents' country of residence. However, under DTAA, relief may be available in the form of credit for Indian taxes paid.

Capital gains can also be invested in specific bonds for up to Rs 50 lakh issued by the National Highway Authority of India (NHAI) or Rural Electrification Corporation (REC) within six months of sale.

Quick Tip

An NRI/OCI/PIO should be well-versed with the income tax implication of their country of residence. There are countries that provide partial or complete exemption on capital gains if all the requisite conditions are met, while few other countries tax the residents no matter where they are originally from.

Rental Management For Non-Residents In India - Know the Agreements Required

Make sure to get a rental agreement signed by your tenant to avoid any unwanted hassles once the agreement expires. There are two types of rental agreements- Rental Lease Agreement and the Leave and License Agreement. The former is used for transfer of ownership from the owner to the lessee for a certain period, while the latter does not give ownership to the lessee.

Tenants can credit the rent amount to the NRE or NRO account of the non-resident. In case one doesn’t have these accounts, the rent can also be sent to an account abroad, provided you have the requisite certification from a chartered accountant, stating that all your taxes have been paid properly.

Tax on Rental Income

The owner is liable to pay taxes on the rental income. The tax amount is deducted at source (TDS), i.e. your tenant. Thus, your tenant must obtain a TAN number and deduct a TDS of 30 percent from the total rent amount. Post this, the TDS certificate must be given to the owner/landlord.

(Note: If the tenant fails to pay the tax amount, he will be held responsible by the tax authorities. Also, you will not be able to declare any incomes from your taxable incomes. However, if you have already paid and filed for tax returns this may not be an issue.)

As per the Indian Income Tax Act, be it Indian resident or non-resident, if you have more than one property on rent, then only one will be considered taxable and the other one will be considered as self-occupied. And if the latter property is not on rent, you will have to pay the income tax on the deemed rental income on the second house.

(Note: Non-residents owning only one property in the world which happens to be in India, then you need not have to pay an income tax on the deemed rental income in India.)

In the case of inherited property in India, you will be liable to pay the tax on deemed income if it is not your only property.

1. POINTS TO REMEMBER!

   – It is advised that you make sure you know which agreement you are opting for.

   – Know about the best way to get your rent credited to your account on time.

   – Know the tax implications well in advance.

2. Real Estate (Regulation and Development) Act, 2016

   The Real Estate Regulatory Act, 2016 (RERA) is a landmark development in the history of the sector in recent times. The Act, once completely implemented, will not only bring in more transparency and accountability in the sector but will also provide mechanisms to simplify and regulate the buying and selling of all types of properties.

3. Below are ten major features of the Act

   – Without signing a sale agreement, developers cannot accept the advance sum of more than 10 percent of the total cost of property from the buyer.

   – A developer will have to maintain a project Escrow Account where 70% of the money can only be withdrawn for the purpose of project land and construction costs.

   – Wrong representation of services/amenities is completely prohibited. All ads and brochures must be uploaded in the authority’s website where all the details pertaining to the projects has been entered.

   – Any structural defect in the property within five years from the date of handing possession must be rectified by the developer within a month’s time without any cost.

   – Specifying time period for project completion during registration is expected to bring in a huge relief for the home buyers.

   – During registration, the developer must reveal the name and address of all the real estate brokers/agents associated with the project.

   – Brokers/agents involved in facilitating the sale or purchase of any project will also have to be mandatory to obtain registration from the concerned authority. In the absence of this, brokers shall not do any such activity around the project.

   – If a developer fails to adhere to any of the norms mentioned in the Act, the authority can cancel the registration of a project on receiving a complaint or suo motu.

   – The authority will grant/reject registration within 30 days of receiving the application of the concerned project. It must give a registration number and login ID/password for accessing the website. Post this, developers will create the webpage and fill in the requisite details pertaining to the project.

   – For the projects that are being developed in phases, the developer will have to register each phase separately. As per the new Act, each phase is considered as a stand-alone real estate project.

   – A developer cannot transfer the rights and liabilities of the real estate project to a third party without getting the written consent from at least two-third of buyers (allottees), and written approval by the concerned authority.

   Several other customer friendly measures are part of this Act. But real estate being a state subject every state in India will be adopting a Real Estate Act applicable to projects in that state.