To make the process of buying a property easier for our ever growing NRI customer base, we have compiled a comprehensive set of facts, rules and requirements in one place which makes investing in our properties hassle free.
Who is a NRI?
Non Resident Indian (NRI) is a citizen of India, who stays abroad for employment/carrying on business or vocation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad is a non-resident. Non-resident foreign citizens of Indian Origin are treated at par with Non Resident Indian (NRIs).
Who is a PIO?
Person of Indian Origin (PIO) (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 an Indian passport, or
2. Whose father or grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).
Who is OCI?
1. 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.
2. A person, who is 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.
Documents required for buying property
PAN card (Permanent account number)
OCI / PIO card (In case of OCI / PIO)
Passport (In case of NRI)
Passport size photographs
Who can purchase immovable property in India?
Under the general permission granted by RBI, the following categories can freely purchase immovable property in India:
1. Non-Resident Indian (NRI)- who is a citizen of India residing outside India
2. 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 purchase of residential and commercial property and not for the purchase of agricultural land/plantation property/farm house in India. OCIs can purchase immovable property in India except agricultural land/plantation property/farmhouse.
Can an NRI / PIO acquire agricultural land/plantation property/farm house in India?
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 from the Reserve Bank and the proposals are considered in consultation with the Government of India.
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.
Do NRIs / PIOs / OCIs have to file returns in India for their property rental income and Capital Gains Tax?
The Government of India has granted general permission to NRI / PIO / OCI to buy property in India and they do not have to pay any taxes even while acquiring the property in India. However, taxes have to be paid if they are selling this property. Rental income earned is taxable in India, and they will have to obtain a PAN and file a return of the income if they have rented this property. On sale of the property, the profit on sale shall be subject to capital gains. If they have held the property for less than or equal to 3 years after taking actual possession then the gains would be short term capital gains, which are to be included in their total income and will be taxed in the normal bracket. However, if the property has been held for more than 3 years, then the resulting gain would be labelled as long-term capital gains subject to 20% tax and some additional levy (cess)
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 which give a favorable tax treatment in respect of certain heads of income. However, in case of sale of immovable property, the DTAA with most countries provide 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.
At times, navigating the legalities of a new home purchase can be a daunting task. To make the process easier, we have compiled the basic legal considerations of acquiring a property in India. Additionally, you can get in touch with us with any specific queries.
1. Non-resident Indians holding an Indian passport do not require any permission from RBI to acquire an immovable property for bonafide residential purposes.
2. Non-resident Indians holding an Indian passport may pay the purchase consideration either by remittance of funds from abroad through normal banking channels or out of their NRO/ NRE/ FCNR account.
3. Ensure that the title report of the property contains no conditions written in fine print and that there are no specific reservations by the State Government.
4. Look for specific clearance reports. For instance, if the construction is near a seafront, you will need to check for a Coastal Regulation Zone (CRZ) clearance. If the project is being constructed over or in close vicinity of a heritage building, you must check for any heritage reservations for the premises. The idea is to ensure that you do not get stuck with a property that is or may get caught in any sort of a dispute. Lack of clearance of titles also means that you will not be able to avail home loans.