NRI Corner


WHO IS NRI (NON-RESIDENT OF INDIA)?

A NON RESIDENT INDIAN (NRI) AS PER INDIA’S FOREIGN EXCHANGE MANAGEMENT ACT 1999 (FEMA), IS AN INDIAN CITIZEN OR FOREIGN NATIONAL OF INDIAN ORIGIN RESIDENT OUTSIDE INDIA FOR PURPOSES OF EMPLOYMENT, CARRYING ON BUSINESS OR VOCATION IN CIRCUMSTANCES AS WOULD INDICATE AN INTENTION TO STAY OUTSIDE INDIA FOR AN INDEFINITE PERIOD.AN INDIVIDUAL WILL ALSO BE CONSIDERED NRI IF HIS STAY IN INDIA IS LESS THAN 182 DAYS DURING THE PRECEDING FINANCIAL YEAR.

WHO IS PERSON OF INDIAN ORIGIN (PIO)?

A PERSON WHO IS NOT A CITIZEN OF INDIA IS DEEMED TO BE OF INDIAN ORIGIN IF HE IS NOT A CITIZEN OF PAKISTAN OR BANGLADESH AND IF • HE AT ANY TIME HELD AN INDIAN PASSPORT; OR • HE OR EITHER OF HIS PARENTS OR ANY OF HIS GRANDPARENTS WAS A CITIZEN OF INDIA BY VIRTUE OF THE CONSTITUTION OF INDIA OR CITIZENSHIP ACT, 1955. A SPOUSE (NOT BEING A CITIZEN OF PAKISTAN OR BANGLADESH) OF AN INDIAN CITIZEN OR OF A PERSON OF INDIAN ORIGIN IS ALSO TREATED AS A PERSON OF INDIAN ORIGIN FOR THE PURPOSE OF NRI DEPOSITS IF THE ACCOUNTS ARE HELD JOINTLY WITH THE NRI/PIO SPOUSE. PIOS ARE EXTENDED THE SAME FACILITIES FOR BANK ACCOUNT MAINTENANCE IN INDIA AS NRIS AND ARE ALSO, FOR SUCH PURPOSES, CALLED BY THE GENERIC NAME AS NRIS.

CAN NRI AND PIO PURCHASE IMMOVABLE PROPERTY IN INDIA?

UNDER THE GENERAL PERMISSION GRANTED BY RBI, THEY CAN FREELY PURCHASE IMMOVABLE PROPERTY IN INDIA.

DOES NRI REQUIRE RBI’S APPROVAL TO INVEST IN INDIA?

NOW NRI CAN PURCHASE THE IMMOVABLE PROPERTY IN INDIA WITHOUT ANY RESTRICTION FROM RBI. NO APPROVAL REQUIRED FROM RBI. TO EASE NRI INVESTMENT IN INDIA, RBI GIVEN RELAXATION IN ITS NORMS AND REGULATION AND SIMPLIFIED MUCH OF THE UNHANDY PROCESS. IF AN NRI HAS BEEN GIFTED WITH OR INHERITED ANY SORTS OF IMMOVABLE PROPERTY, RBI HAS NO RULES TO GOVERN THOSE KINDS OF PROPERTIES. RBI DOES NOT RESTRICT THE LEASING OR RENTING OF THE PROPERTY IF IT IS ALREADY ACQUIRED BY AN NRI.

WHAT BASIC DOCUMENTS ARE REQUIRED BY NRI/POI FOR BUYING PROPERTY?

HERE ARE THE BASIC DOCUMENTS AN OVERSEAS INDIAN WOULD NEED WHEN THEY’RE TRYING TO PURCHASE COMMERCIAL OR RESIDENTIAL PROPERTY IN INDIA. • ADDRESS PROOF • OCI/PIO CARD (IN CASE OF OCI/PIO) • PAN CARD (PERMANENT ACCOUNT NUMBER) • PASSPORT (IN CASE OF NRI) • PASSPORT SIZE PHOTOGRAPHS

CAN NRIS OBTAIN A HOUSING LOAN TO PURCHASE IMMOVABLE PROPERTY IN INDIA?

I) NRI/ PIO CAN MORTGAGE TO: (A) AN AUTHORISED DEALER/ HOUSING FINANCE INSTITUTION IN INDIA- WITHOUT THE APPROVAL OF RESERVE BANK. (B) A PARTY ABROAD - WITH PRIOR APPROVAL OF RESERVE BANK. II) A FOREIGN NATIONAL OF NON-INDIAN ORIGIN CAN MORTGAGE ONLY WITH PRIOR APPROVAL OF RESERVE BANK III) A FOREIGN COMPANY WHICH HAS ESTABLISHED A BRANCH OFFICE OR OTHER PLACE OF BUSINESS IN ACCORDANCE WITH FERA/FEMA REGULATIONS HAS GENERAL PERMISSION TO MORTGAGE THE PROPERTY WITH AN AUTHORIZED DEALER IN INDIA.

WHAT IS POWER OF ATTORNEY AND TYPES OF POWER OF ATTORNEY (POA) ?

WRITTEN LEGAL AUTHORITY GIVEN BY ONE PARTY (THE PRINCIPAL) TO ANOTHER (THE AGENT OR ATTORNEY-IN-FACT) TO ACT ON THE PRINCIPAL'S BEHALF. IT MAY BE A (1) GENERAL POWER OF ATTORNEY THAT AUTHORIZES THE AGENT TO ACT GENERALLY ON BEHALF OF THE PRINCIPAL, OR (2) SPECIAL POWER OF ATTORNEY THAT IS LIMITED TO A SPECIFIC ACT OR SITUATION. DECISIONS MADE AND ACTIONS TAKEN BY AN ATTORNEY IN FACT (WITHIN THE SCOPE OF HIS OR HER AUTHORITY) ARE LEGALLY BINDING ON THE PRINCIPAL. A POWER OF ATTORNEY CAN REMAIN IN FORCE ONLY SO LONG AS THE PRINCIPAL IS ALIVE AND DOES NOT BECOME DISABLED OR INCAPACITATED. ALTHOUGH IT IS OFTEN CONFERRED ON THE PRINCIPAL'S ATTORNEY, ONE DOES NOT NEED TO BE AN ATTORNEY AT LAW TO BE AN ATTORNEY-IN-FACT.

WHAT ARE THE DOCUMENTS REQUIRED FOR LOAN SANCTION PROCESS FROM NRI?

LIST OF HOME LOAN DOCUMENTS REQUIRED FOR NON RESIDENT INDIANS (NRIS) • PASSPORT SIZE LATEST PHOTOGRAPHS OF EACH APPLICANT (APPLICANT & CO-APPLICANT) • VALID PASSPORT • VALID VISA • DOCUMENT ESTABLISHING KYC. • LATEST IT RETURNS (FOR APPLICANTS FILING IT RETURNS IN THE COUNTRY). • FOR SELF EMPLOYED NRIS, BUSINESS DOCUMENTS LIKE TRADE LICENSE, SPONSOR AGREEMENT, POWER OF ATTORNEY, ETC. • SALARY CERTIFICATE FROM EMPLOYER/LAST 3 TO 6 MONTHS’ SALARY SLIPS REFLECTING VARIABLE COMPONENTS LIKE INCENTIVES, OVERTIME, ETC. • FOR SELF EMPLOYED 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) • PROOF OF EMPLOYMENT BY THE GOVERNMENT OF THE RESIDING COUNTRY LIKE WORK PERMIT, LABOUR CONTRACT, ETC. • NRO/NRE BANK STATEMENT. • IF APPLICANT IS UNAVAILABLE IN THE COUNTRY AT THE TIME OF SIGNING DOCUMENTS, POWER OF ATTORNEY NEEDS TO BE PRODUCED BY THE PERSON ACTING ON THEIR BEHALF. • ADDRESS PROOF OF CO APPLICANT (LATEST TELEPHONE BILL /ELECTRICITY BILL)

WHAT ARE THE TYPES OF PROPERTIES WHERE NRI CAN INVEST?

THERE IS NO RESTRICTION ON THE NUMBER OF PROPERTIES THAN AN NRI CAN INVEST IN. AN NRI, AS WELL AS A PERSON OF INDIAN ORIGIN (PIO), CAN PURCHASE AS MANY RESIDENTIAL AS WELL AS COMMERCIAL PROPERTIES IN INDIA AS THEY WANT. HOWEVER, THERE IS A RESTRICTION ON FOREIGN INVESTMENT WHEN IT COMES TO AGRICULTURAL LAND, PLANTATION PROPERTY OR A FARMHOUSE. SUCH PROPERTIES ARE ALLOWED ONLY IN CASE THEY ARE INHERITED OR GIFTED TO THE NRI IN QUESTION.

IS THERE ANY SPECIFIC PAYMENT METHOD FOR NRI?

WHEN AN NRI IS BUYING PROPERTY IN INDIA, S/HE CAN MAKE PAYMENTS THROUGH NORMAL NET BANKING BY WAY OF INWARD REMITTANCE. THEY CAN ALSO DO THE TRANSACTION USING NON-RESIDENT RUPEE (NRE) ACCOUNTS OR A NON-RESIDENT ORDINARY RUPEE (NRO) ACCOUNTS OR A FOREIGN CURRENCY NON-RESIDENT DEPOSITS ACCOUNTS. THERE IS NO NECESSITY OF PAYMENT IN FOREIGN CURRENCY CASH OR VIA CHEQUE.

WHAT IS THE TAX BENEFIT FOR NRI?

AS AN NRI YOU CAN ENJOY MOST OF THE TAX BENEFITS THAT AN INDIAN RESIDENT IS ENTITLED TO ON PURCHASE OF PROPERTY. YOU CAN CLAIM A DEDUCTION OF RS. 1 LAKH UNDER SECTION 80 C ON THE INCOME TAX ACT, 1961. IF YOU SELL THE PROPERTY WITHIN THREE YEARS OF PURCHASE, IT IS CONSIDERED AS SHORT-TERM CAPITAL GAIN, AND THE EARNINGS THROUGH THE PROPERTY ARE TAXABLE. IF YOU SELL THE PROPERTY AFTER THREE YEARS, YOU HAVE THE OPTION OF REDUCING THE LONG-TERM CAPITAL GAINS TAX BY INVESTING IN ANOTHER PROPERTY.

DO NRI/PIO HAVE TO FILE RETURN IN INDIA FOR THEIR PROPERTY RENTAL INCOME AND CAPITAL GAINS TAX?

THE GOVERNMENT OF INDIA HAS GRANTED GENERAL PERMISSION FOR NRI/PIO TO BUY PROPERTY IN INDIA AND THEY DO NOT HAVE TO PAY ANY TAXES EVEN WHILE ACQUIRING 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 RETURN OF INCOME IF THEY HAVE RENTED THIS PROPERTY. ON SALE OF THE PROPERTY, THE PROFIT ON SALE SHALL BE SUBJECT TO CAPITAL GAINS.

WHAT IS MEANT BY “REPATRIATION”? WHAT IS THE LAW RELATING TO REPATRIATION OF FUNDS?

THE TERM “REPATRIATION” BASICALLY MEANS THE FLOW OF CAPITAL FROM A FOREIGN COUNTRY TO THE COUNTRY OF ORIGIN. IN THIS CASE, IT IS THE FOREIGN EARNINGS THAT AN OVERSEAS INDIAN HAS TO TRANSFER BACK TO INDIA IN ORDER TO BUY SOME PROPERTY. AN NRI/PIO CAN PURCHASE IMMOVABLE (COMMERCIAL & RESIDENTIAL) PROPERTY IN INDIA USING THEIR REPATRIABLE FUNDS. BUT A MAJOR CLAUSE REGARDING THE PURCHASE IS THAT NONE OF THE PAYMENTS CAN BE MADE IN FOREIGN CURRENCY.


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