Regulations/Directions issued by Reserve Bank of India
Regulations regarding ACQUISITION and TRANSFER of IMMOVABLE PROPERTY IN INDIA by a person resident outside India have been notified vide RBI Notification No. FEMA 21/2000-RB dated May 3, 2000 as amended vide Notification No. FEMA 64/2002-RB dated June 29, 2002 and Notification No. FEMA 65/2002-RB dated June 29, 2002 and relevant directions issued in the form of A.P. (DIR Series) Circulars.
These are available on RBI website: www.fema.rbi.org.in
SYNOPSIS OF IMPORTANT POINTS CLARIFIED IN THESE GUIDELINES
- ACQUISITION OF IMMOVABLE PROPERTY
By NRIs holding Indian Passport
- NRIs holding Indian passport do not require prior permission of Reserve Bank of India to buy residential or commercial immovable property in India.
- The purchase consideration may be paid either by remittance of funds from abroad through normal banking channels or out of NRE/ FCNR/NRO account.
- NRIs of Indian nationality do not require any permission for acquisition, transfer or disposal by way of gift of immovable property which is not a farmhouse or agricultural land or plantations property. Declaration on form IPI 7 for acquisition of commercial property for carrying on any industrial, commercial or trading activity by their proprietary/partnership firm in India is required to be filed with RBI within 90 days from date of purchase.
By Foreign Citizens of Indian Origin
Under the general permission to NRIs holding a foreign passport, the RBI has allowed them to acquire, hold, transfer or dispose off by way of sale or inheritance, immovable properties situated in India.
- The general permission has been granted provided:
- The property is for the purchaser’s bona fide residential use;
- The purchase consideration is met either by remittance from funds abroad through normal banking channels or out of NRE/FCNR.
- Income accruing by way of rent from the properties purchased or acquired by inheritance will not be allowed to be repatriated abroad even if the purchase consideration was met out of NRE/FCNR account. It is however, necessary for foreign citizens of Indian origin to declare such property to RBI within a period of 90 days from the date of purchase in the prescribed IPI 7 to the Chief General Manager, Exchange Control Department, Foreign Investment Division, Central Office Department, Foreign Investment Division, Central Office, RBI Bombay.
SALE OF IMMOVABLE PROPERTY
- General permission has been given to non-residents holding Indian passports and foreign citizens of Indian origin, whether resident in India or not, to dispose of by sale or inheritance immovable properties situated in India subject to certain conditions.
- Non-residents holding Indian passports and foreign citizens of Indian origin have been allowed to repatriate original investment in equivalent foreign exchange in residential/commercial properties after obtaining prior approval subject to a maximum of two houses under certain conditions.
- No transfer of any immovable property exceeding the specified value for different cities can be effected unless particulars are filed with the appropriate authority of the Income Tax department within 15 days of signing the agreement.
- As per a new scheme of capital gains tax with effect from 1993-94, instead of deducting from the proceeds of transfer, actual amount spent to acquire the asset or the amount spent on improvement or addition thereto, the inflation index adjusted cost will be deducted. Brokerage, legal fees and other expenses incurred in selling the property would be allowed as a deduction from the taxable capital gains.
RENTAL INCOME FROM IMMOVABLE PROPERTY
The RBI has granted general permission to NRI’s and foreign citizens of Indian origin, to let out their residential properties acquired for their bona fide residential purpose but which on account of their residence abroad, are not required for their immediate residential purpose. However, there are restrictions regarding the repatriation of the rental income earned from such letting out of the property. The rental income is on a non-repatriation basis. Thus funds (rental income) must be credited to the NRO Account/ Resident Accounts in India.