NRI Support

Who is Non-Resident Indian?

Section 2(v) of FEMA, 1999 has given a definition of "Person resident in India" and from the definition, one must conclude whether he or she is Non-Resident of India or not. Following is the definition of a Person resident in India.

  • A person residing in India for more than one hundred and eighty-two days during the course of the preceding financial year but does not include -
    • A person who has gone out of India or who stays outside India, in either case.
      • For or on taking up employment outside India.
      • For carrying on outside India a business or vocation outside India.
      • For any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period.
    • A person who has come to or to stay in India, in either case, otherwise than:
      • For or on taking up employment in India.
      • For carrying on in India a business or vocation in India.
      • For any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period.
    • Any person or body corporate registered or incorporated in India.
    • An office, branch, or agency in India owned or controlled by a person resident outside India.
    • An office, branch, or agency outside India owned or controlled by a person resident in India.

      Explanation - Section 2(u) clarifies that a person includes -

      • An individual.
      • A Hindu undivided family.
      • A company.
      • A firm.
      • An association of persons or a body of individuals, whether incorporated or not.
      • Every artificial juridical person, not falling within any of the preceding sub-clauses.
      • Any agency, office, or branch owned or controlled by such person.

Who is a Person of Indian Origin?

FEMA 1999 has not given a definition of a Person of India Origin. However, the Reserve Bank of India in its various FEMA Notifications issued under FEMA, 1999 has defined a Person of India Origin as under:
  • For the purpose of opening non-resident bank accounts in India Person of India Origin means a citizen of any country other than that of Bangladesh or Pakistan, if -
    • He at any time held an Indian passport.
    • He or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India of the Citizenship Act, 1955 (57 of 1955).
    • The person is a spouse of an Indian citizen, or a person referred to in sub-clause (a) or (b) above.
  • For the purpose of investing in shares/debentures etc. in India Person of Indian Origin means a citizen of any country other than that of Bangladesh or Pakistan if-
    • He at any time held India passport.
    • He or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India of the Citizenship Act, 1955 (57 of 1955).
    • The person is a spouse of an India citizen, or a person referred to in sub-clause (a) or (b) above.
  • For the purpose of acquiring immovable property in India Person of Indian Origin means a citizen of a country other than that of Bangladesh or Pakistan or Sri Lanka or Afghanistan or China or Hong Kong or Macau or Iran or Nepal and Bhutan if-
    • He at any time held India passport.
    • He or whose father or mother or whose grandfather or grandmother was a citizen of India by virtue of the Constitution of India of the Citizenship Act 1955 (57 of 1955).
  • For the purpose of establishing a branch or office in India Person of Indian Origin means a citizen of any country other than that of Bangladesh or Pakistan or Sri Lanka or Afghanistan or China or Iran of Hong Kong or Macau if -
    • At any time held India passport.
    • He or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India of the Citizenship Act. 1955 (57 of 1955).
    • The person is a spouse of an Indian citizen, or a person referred to in sub-clause (a) or (b) above.
  • For the purpose of acquiring a PIO Card Person of Indian Origin means a citizen of any country other than that of Bangladesh or Pakistan, if -
    • He at any time held an India Passport.
    • He/she or either of his/her parents or grandparents or great grandparents was born in India and permanently resident in India as defined in the Government of India Act, 1935, and other territories that became part of India thereafter provided neither was at any time a citizen of any country as may be specified by Central Government from time to time.
    • Who is a spouse of a citizen of India, or a Person of Indian Origin as mentioned above.

Who is OCI?

  • Any person of full age and capacity:
    • Who is a citizen of another country, but was a citizen of India at the time of, or at any time after, the commencement of the constitution, or
    • Who is a citizen of another country, but was eligible to become a citizen of India at the time of the commencement of the constitution, or
    • Who is a citizen of another country, but belongs to a territory that became part of India after the 15th of August 1947
    • Who is a child of such a citizen, or
    • A person, who is a minor child of a person mentioned in clause (1)
  • Provided that no person, who is or had been a citizen of Pakistan, Bangladesh shall be eligible for registration as an Overseas Citizen of India

Who can purchase immovable property in India?

  • Under the general permission granted by RBI, the following categories can freely purchase immovable property in India:
    • Non-Resident Indian (NRI)- who is a citizen of India residing outside India.
    • Person of Indian Origin (PIO)- who 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:
      • At any time, held Indian passport or
      • 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 the purchase of residential and commercial property and not the purchase of agricultural land/plantation property/farmhouse in India.
  • OCIs can purchase immovable property in India except for agricultural land/plantation property/farmhouse.

Are there any restrictions on the number of residential/commercial properties that NRI/PIO can purchase under the general permission available?

There is no restriction on the number of residential/commercial properties that NRI/PIO can purchase under the general permission available.

Can the name of a foreign national of non-Indian origin be added as a second holder to a residential / commercial property purchased by NRI/PIO?

No.

Can a foreign national of non-Indian origin resident outside India acquire any immovable property in India by way of purchase?

No.

Can a foreign national of Non-Indian origin acquire residential property on lease in India?

Yes. A foreign national of non-Indian origin including a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Hong Kong or Macau or Iran or Nepal or Bhutan may acquire only residential accommodation on lease, not exceeding five years for which he/she does not require prior permission of Reserve Bank of India.

Can NRI/PIO acquire residential/commercial property by way of gift under the general permission available?

Yes. Under general permission available NRI/PIO may acquire residential/commercial property by way of a gift from a person resident in India or a NRI or a PIO.

Can a foreign national of non-Indian origin resident outside India acquire residential/commercial India by way of a gift?

No.

Can a person resident outside India (i.e., an NRI or a PIO or a foreign national of Non-Indian origin) acquire agricultural land/plantation property/farmhouse in India by way of gift?

No

Can a person resident outside India (i.e., NRI or PIO or foreign national of non-Indian origin) hold any immovable property in India acquired by way of inheritance from a person resident outside India?

With the specific approval of the Reserve Bank, a person resident outside India may hold any immovable property in India acquired by way of inheritance from a person resident outside India, provided the bequeath or had acquired such property in accordance with the provisions of foreign exchange law in force at the time of acquisition or under FEMA regulations.

To whom can NRI transfer by way of the sale of his residential/commercial property?

NRI can transfer by way of the sale of residential/commercial property in India to a person resident in India or to an NRI or a PIO.

To whom can a PIO transfer his residential/commercial property by way of sale?

PIO can transfer by way of sale residential/commercial property in India only to a person resident in India.

Can a PIO transfer by way of selling his residential/commercial property to an NRI or a PIO?

No. He must seek Reserve Bank prior approval for transfer by way of sale of residential/commercial property in India to an NRI or a PIO

Can a foreign national of non-Indian origin whether resident in India or outside India transfer by way of sale residential/property in India acquired with the specific permission of Reserve Bank to a person resident in India or outside India?

A foreign national of non-Indian origin whether resident in India or outside India would need to seek prior approval of the Reserve Bank for transfer by way of sale of residential/property in India acquired with the specific permission of the Reserve Bank to a person resident in India or outside India.

Under general permission available can NRI/PIO transfer his residential/commercial property by way of a gift?

Yes. NRI/PIO may transfer by way of gift residential/commercial property in India to a person resident in India or an NRI or a PIO.

Can a foreign national of non-Indian origin resident in India or outside India transfer by way of mortgage his residential/commercial property in India, acquired with the specific approval of Reserve Bank to a party in India or abroad?

No. He should seek prior approval from RBI. However, immovable property purchased by a person resident outside India who has established a Branch Office or other place of business for carrying on in India any activity in accordance with FERA/FEMA regulations, may under the general permission available, mortgage such a property with an authorized dealer as a security for any borrowing.

Under the general permission available what is the mode of payment for the purchase of residential/commercial property in India by NRI/PIO?

Under the general permission available NRI/PIO may purchase residential/commercial property in India out of funds remitted to India through normal banking channels or funds held in his NRE/FCNR (B)/NRO Account No. consideration shall be paid outside India.

Under the general permission available what is the mode of payment for the purchase of residential/commercial property in India by NRI/PIO?

Under the general permission available NRI/PIO may purchase residential/commercial property in India out of funds remitted to India through normal banking channels or funds held in his NRE/FCNR (B)/NRO Account No. consideration shall be paid outside India.

Can refund of application/earnest money/purchase consideration made by the flat/ building agencies/seller on account of non-allotment of flat/plot/cancellation of bookings/deals for purchase of residential/commercial property together with interest, if any (net of income tax payable thereon) be credited to NRE account?

Yes, provided the original payment was made by way of inward remittance or by debit to NRE/FCNR (B) account. For this purpose, no permission from Reserve Bank is required and they may approach the Authorised Dealer directly in the matter.

Can NRI/PIO repatriate the sale proceeds of residential/commercial property in India acquired by way of inward remittance through normal banking channels or by debit to NRE/FCNR (B)/NRO account. If so, what is the quantum?

NRI/PIO may repatriate the sale proceeds of residential/commercial property in India acquired by way of inward remittance through normal banking channels or by debit to the NRE/FCNR (B) account. The amount to be repatriated should not exceed the amount paid for the acquisition of residential/commercial property (a) in foreign exchange received through normal banking channel or by debit to FCNR (B) account or (b) the foreign currency equivalent as on the date of payment, of the amount paid by debit to NRE account. The sale proceeds of residential/commercial property in India acquired by way of debit to the NRO account cannot be repatriated and should be credited to the NRO account only.

The rupee loan availed by NRI for the purchase of residential accommodation was repaid either by inward remittance or by debit to NRE/FCNR (B) account. Can the sale proceeds of such property be repatriated?

Yes. Repayment of a loan in foreign exchange is treated as equivalent to the foreign exchange received for the purchase of residential accommodation.

Is there any restriction on the repatriation of sale proceeds of residential property purchased by NRI/PIO out of funds remitted to India through normal banking channels or funds held in his NRE/FCNR (B) account?

Yes. Repatriation of sale proceeds is restricted to not more than two residential properties.

Can the sale proceeds of any immovable property inherited by NRI/PIO/a foreign national of non-Indian origin resident outside India from a person resident in India be remitted abroad?

Yes. Amount not exceeding USD one million, per calendar year subject to production of documentary evidence support of inheritance and Tax clearance certificate/no objection certificate from Income Tax authority to authorized dealer from remittances. However, if a PIO is a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China, Hong Kong, Macau, or Iran he should seek prior approval or Reserve Bank with documentary evidence support of inheritance and tax clearance/no objection certificate from the Income Tax authority. This remittance is not available to a citizen of Nepal or Bhutan.

Can sale proceeds of any immovable property in India inherited, by a person resident outside India (i.e. NRI or PIO or foreign national of non-Indian origin resident outside India), from a person resident outside India be repatriated by him or his successor?

No. He needs to seek prior approval from Reserve Bank with documentary evidence in support of inheritance and a clearance/no objection certificate from the Income Tax authority.

Taxation and Finance: What is the Tax treatment for income generated from property selling or renting for NRI/PIO/OCI?

The mere acquisition of property does not attract income tax. However, any income accruing from the ownership of it, in the form of rent (if it is let out)/annual value of the house (if is not let out and it is not the only residential property owned by that person in India) and/or capital gains (short term or long term) arising on the sale of this house or part thereof is taxable in the hands of the owner.

Does Capital Gains Tax (CGT) apply to NRI / PIO / OCI?

Yes. Long-term and short-term capital gains are taxable in the hands of non-residents.

How does Double Taxation Avoidance Agreement work in the context of CGT paid in India on the foreign tax treatment?

In case the non-resident pays any tax on capital gains arising in India, he would normally be able to obtain a tax credit with respect to the taxes paid in India/ home country, because the income in India would also be included in the country of tax residence. The amount of tax credit is also on the basis of computing the tax credit that can be claimed as specified in the respective country’s DTAA and is also dependent on the laws of the home country where the taxpayer is a tax resident.

What are the rules governing the repatriation of the proceeds of the sale of immovable properties by NRI / PIO as prescribed by the Reserve Bank of India?

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:

  • In foreign exchange received through normal banking channels or
  • By debit to the NRE account (foreign currency equivalent, as of the date of payment) or debit to the FCNR(B) account.

 

Repatriation of sale proceeds of residential property purchased by NRIs/PIOs out of the 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 NRIs / PIOs may repatriate an account up to USD One million, per financial year, as discussed below

  • If the property was acquired out of Rupee sources, NRI / PIO may remit an amount of 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. 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.

Is the rental income from property repatriable and what are the RBI rules?

The rental income, being a current account transaction, is repatriable, subject to the appropriate deduction of tax and the certification thereof by a Chartered Accountant in practice. Repatriation of sale proceeds is subject to certain conditions. The amount of repatriation cannot exceed the amount paid for the acquisition of the immovable property in foreign exchange.

Is NRI / PIO / OCI eligible for Housing loans to buy property from any Indian Bank?

An authorized dealer or a housing finance institution in India approved by the National Housing Bank may provide a housing loan to a non-resident Indian or a person of Indian Origin residing outside India for the acquisition of a residential accommodation in India, subject to the following conditions, namely:

How does the Double Taxation Avoidance Agreement (DTAA) work in the context of tax on income and Capital Gains tax paid in India by NRI?

India has DTAAs with several countries that give favourable tax treatment in respect of certain heads of income. However, in the case of the sale of immovable property, the DTAA in most countries provides that the capital gains will be taxed in the country where the immovable property is located. Hence, the non-resident will be subject to tax in India on the capital gains which arise on the sale of immovable property in India. Letting of immovable property in India would be taxed in India under most tax treaties in view of the fact that the property is in India.

Can NRI/PIO, avail of a housing loan in rupees from an authorized dealer or housing finance institution in India approved by the National Housing Finance Bank for the purchase of residential accommodation or the purpose of repairs/renovation/improvement of residential accommodation?

Yes, subject to certain terms and conditions. Such loans can be repaid by the borrower by way of inward remittance through normal banking channels or by debit to his NRE/FCNR (B)/NRO account or out of rental income derived from renting out such property. Such a loan can also be repaid by the borrower’s close relatives through their account in India by crediting the borrower’s loan account.

Can NRI avail of a housing loan in rupees from his employer in India?

Yes, subject to certain terms and conditions

Who should file tax returns?

If you are an NRI / OCI / PIO, you would have to file your income tax returns if you fulfil either of these conditions:

  • Your taxable income in India during the year was above the basic exemption limit of INR.1.6 lakh OR
  • You have earned short-term or long-term capital gains from the sale of any investments or assets, even if the gains are less than the basic exemption limit.

Note: The enhanced exemption limit for senior citizens and women is applicable only to Residents and not to Non-Residents.

What's the best way to file tax returns? Are there any exceptions?

Yes, there are two exceptions:

  • If your taxable income consisted only of investment income (interest) and/or capital gains income and if tax has been deducted at source from such income, you do not have to file your tax return.
  • If you earned long-term capital gains from the sale of equity shares or equity mutual funds, you do not have to pay any tax and therefore you do not have to include that in your tax return.

 

Tip: You may also file a tax return if you must claim a refund. This may happen where the tax deducted at source is more than the actual tax liability. Suppose your taxable income for the year was below INR.1.6 lakh but the bank deducted tax at source on your interest amount, you can claim a refund by filing your tax return. Another instance is when you have a capital loss that can be set off against capital gains. Tax may have been deducted at source on the capital gains, but you can set off (or carry forward) capital loss against the gain and lower your actual tax liability. In such cases, you would need to file a tax return.

What's the best way to file tax returns?

Traditionally, you could file your tax return either by giving a power of attorney to someone in India or by sending your form and documents to a tax expert in India who would then file the return on your behalf. But nowadays, the easiest option for NRIs to file their Indian tax returns is by using an online platform. There are several options to file online.

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