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FAQ's

Q. What is the definition of an NRI?

A. A NRI is a person residing outside India who is either a citizen of India or a person of Indian origin. A NRI is an Indian Citizen who has migrated to another Country. For all official purpose the Government of India considers Indian National away from India for more than 182 days, in a year.

 

Q. What is the definition of a foreign citizen?

A. A foreign citizen is deemed to be of Indian origin if

  • He held an Indian passport at any time, OR

  • He or his father or paternal grand-father was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).  This citizen should be other than a citizen of Pakistan, Bangladesh, Afghanistan, Bhutan, Sri Lanka or Nepal)

 

Q. Is there are any Lock in period for such investment?

A. Currently there is no lock in period.

 

Q. Do NRI citizens require permission of The Reserve Bank to acquire residential/commercial property in India?

A. No

 

Q. Do foreign citizens of Indian origin require permission of The Reserve Bank to buy immovable property in India for their residential use?

A. Reserve Bank has granted general permission to foreign citizens of Indian origin, whether resident in India or abroad, to purchase immovable property in India for their bona      fide residential purpose. They are therefore not required to obtain separate permission from The Reserve Bank.

 

Q. How can foreign citizens of Indian origin pay for a residential immovable property in India?

A. The payment should be made either out of inward remittances in foreign exchange through normal banking channels or out of funds from NTE/FCNR accounts maintained          with banks in India.

 

Q. What are the formalities to be completed to purchase residential immovable property in India?

A. They are required to file a declaration in form IPI 7 with the Central Office of Reserve Bank at Mumbai within a period of 90 days from the date of purchase of immovable              property or final payment of purchase along with a certified copy of the document confirming the transaction and bank certificate regarding the payment.

 

Q. Can foreign citizens of Indian origin acquire or dispose off residential property by way of gift?

A. Yes. The Reserve Bank has granted general permission to foreign citizens of Indian origin to acquire or dispose of properties up to two houses by way of gift from or to a            relative who may be an Indian citizen or a person of Indian origin whether resident in India or not, provided gift tax has been paid.

 

Q. In case of repatriation is there any tax liability to the Indian Government?

A. Yes, during repatriation Capital Gains (Long Term/Short Term) as applicable will be attracted.
     Long Term Capital Gains: For properties held for 36 months or more are termed as
     Long Term Capital Assets, and currently attracts a rate of 22.6%
     (Fin. Year: 2007-08)
     Short Term Capital Gains: For properties held for less than 36 months are termed as
     Short Term Capital Assets, and currently attracts a rate of 33.9%

 

Q. Can foreign citizens of Indian origin acquire commercial properties in India?

A. Yes. Under the general permission granted by the Reserve Bank of India with the same procedure as residential property.

 

Q. Can the properties (residential/commercial) be given on rent by foreign citizen of Indian origin if not required for immediate use?

A. Yes. The rental income or proceeds of any investment of such income has to be credited to NRO account.

 

Q. Can NRIs obtain loans for acquiring house for residential purpose from financial institutions providing housing finance?

A. Yes. Reserve Bank has granted general permission to certain financial institutions providing housing finance e.g. HDFC,LIC Housing Finance Ltd. etc. to grant housing loans      to non-resident Indian nationals for acquiring houses for self-occupation subject to certain conditions.

 

Q. Can NRI staff avail loans from their Indian companies?

A. Yes. Reserve Bank permits Indian firms/companies to grant housing loans to their employees deputed abroad and holding Indian passport subject to certain conditions.

 

Q. Where can one find regulations/directions issued by Reserve Bank for acquisition and transfer of immovable property in India by a person resident outside India?

A. 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 web site: www.fema.rbi.org.in

 

Q. Can a person resident outside India (i.e. a NRI or a foreign national of non-Indian origin) acquire agricultural land/plantation property/farm house in India by way of                        purchase?

A. No.

 

Q. Can NRI sell property in India?

A. Yes.

 

Q. Whom can an NRI sell/ transfer a property in India?

A. An NRI can sell/ transfer the property in India to a citizen of India or NRI or foreign national if of Indian origin.

 

Q. Can such property be sold without the permission of Reserve Bank?

A. Yes. Reserve Bank has granted general permission for sale of such property. However, where the property is purchased by another foreign citizen of Indian origin, funds            towards the purchase consideration should either be remitted to India or paid out of balances in NRE/FCNR accounts.

 

Q. Can sale proceeds of such property if and when sold be remitted out of India?

A. In respect of residential properties purchased on or after 26th May 1993, Reserve Bank considers applications for repatriation of sale proceeds up to the consideration                amount remitted in foreign exchange for the acquisition of the property for two such properties. The balance amount of sale proceeds if any or sale proceeds in respect of          properties purchased prior to 26th May 1993 will have to be credited to the ordinary non-resident rupee account of the owner of the property.

   

Q. What are the facilities available to NRIs, PIO for investment in India?

A. 1)  Bank Accounts and Deposits

     a)  Non-Resident (External) Rupee (NRE) Accounts (Principal/ Interest Repatriable)

  •     Savings the interest rates on NRE Savings deposits shall be at the rate applicable to domestic savings deposits. Currently the interest rate is 3.5%.

  •     Term deposits – For 1 year to 3 years, the interest rates on fresh repatriable Non-Resident (External) Rupee (NRE) Term deposits should not exceed the                      LIBOR/SWAP rates, as on the last working day of the previous month, for US dollar of corresponding maturity plus 50 basis points.

               The interest rates as determined above for three year deposits should also be applicable in case the maturity period exceeds three years. The changes in interest rates                will also apply to NRE deposits renewed after their present maturity period.

 

      b)  FCNR  ( Principal/Interest Repatriable ) Deposits of funds in the account may be accepted in such permissible currencies as may be designated by the Reserve Bank                     from time to time.

  •       Presently the term deposit can be placed with ADs in India in 6 specific foreign currencies (US Dollar, Pound Sterling, EURO, Japanese Yen, Australian Dollar           and Canadian Dollar).

  •       Rate of Interest - Fixed or floating within the ceiling rate of LIBOR/SWAP rates for the respective currency/corresponding term minus 25 basis points.

  •       Maturity of deposits: 1-5 years.

 

       c)  NRO Accounts (Current earnings repatriable)

  •       Savings - Normally operated for crediting rupee earnings / income such as dividends, interest. Currently the interest rate is 3.5 per cent.

  •       Term Deposits - Banks are free to determine interest rates.

 

       d)  Repatriation from NRO balances Authorised Dealers can allow remittance/s upto USD 1 million per financial year (April-March) for bonafide purposes, from balances in                NRO accounts subject to payment of applicable taxes. The limit of USD 1 million per financial year includes sale proceeds of immovable properties held by NRIs/PIO.

 

2) Other Investments on repatriation basis

  •     Government dated securities/treasury bills.

  •     Units of domestic mutual funds.

  •     Bonds issued by a public sector undertaking (PSU) in India.

  •     Non-convertible debentures of a company incorporated in India.

  •     Shares in Public Sector Enterprises being dis-invested by the Government of India, provided the purchase is in accordance with the terms and conditions                 stipulated in the notice inviting bids.

  •     Shares and convertible debentures of Indian companies under FDI scheme (including automatic route & FIPB).

  •     Shares and convertible debentures of Indian companies through stock exchange under Portfolio Investment Scheme.

  •     Perpetual debt instruments and debt capital instruments issued by banks in India.

 

3)  Other Investments on non-repatriation basis

  •    Government dated securities (other than bearer securities)/treasury bills.

  •    Units of domestic mutual funds.

  •    Units of Money Market Mutual Funds in India.

  •    Non-convertible debentures of a company incorporated in India.

  •    The capital of a firm or proprietary concern in India, not engaged in any agricultural or plantation activity or real estate business.

  •    Deposits with a company registered under the Companies Act, 1956 including NBFC registered with RBI, or a body corporate created under an Act of Parliament      or State Legislature, a proprietorship concern or a firm out of rupee funds which do not represent inward remittances or transfer from NRE/FCNR(B) Accounts          into the NRO Account.

  •    Commercial Paper issued by an Indian company.

  •    Shares and convertible debentures of Indian companies other than under Portfolio Investment Scheme.

 

4)  Investment in immovable Property

  •     May acquire immovable property in India other than agricultural land/ plantation property or a farm house out of repatriable and non-repatriable funds.

  •     May acquire immovable property in India other than agricultural land/ plantation property or a farm house out of repatriable and non-repatriable funds..

  •     Sale proceeds of immovable property acquired in India to the extent of repatriable funds used for acquiring the property, up to two residential properties. The           balance will be repatriable through NRO Account subject to conditions mentioned at item (I) (d)..

  •      Refund of (a) application / earnest money / purchase consideration made by house-building agencies/seller on account of non-allotment of flats / plots and (b)          cancellation of booking/deals for purchase of residential/commercial properties, together with interest, net of taxes, provided original payment is made out of            NRE/FCNR(B) account/inward remittances.

  •      Housing Loan in rupees availed of by NRIs from ADs / Housing Financial Institutions can be repaid by the close relatives in India of the borrower.

 

5) Facilities to returning NRIs/ PIO (Returning NRIs/ PIO)

  •      May continue to hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India, if such currency, security or      property was acquired, held or owned when resident outside India.

  •      May open, hold and maintain with an authorised dealer in India a Resident Foreign Currency (RFC) Account to transfer balances held in NRE/FCNR(B) accounts.      Proceeds of assets held outside India at the time of return, can be credited to RFC account. The funds in RFC accounts are free from all restrictions regarding          utilisation of foreign currency balances including any restriction on investment in any form outside India.

 

Q. Do non-resident Indian nationals require permission of the Reserve Bank of India to acquire residential/commercial property in India?

A. No permission is required by non-resident Indian nationals to acquire immovable property in India.

 

Q. What should be the method of payment for purchasing residential immovable property in India by foreign nationals of Indian origin under the general permission?

A. The purchase consideration should be met either out of inward remittances in foreign exchange through normal banking channels or out of funds from NRE/FCNR accounts maintained with banks in India.

 

Q. Can the rental income from such property be remitted outside India?

A. No. Such income cannot be remitted abroad and will have to be credited to the ordinary non-resident rupee account of the owner of the property. Restricted remittances are,however, now permitted.

 

Q. What are the conditions required to be fulfilled for repatriation of sale proceeds?

A. Applications for repatriation of sale proceeds are considered provided the sale takes place after three years from the date of final purchase deed or from the date of payment of final of consideration amount, whichever is later.

 

Q. What is the procedure for seeking such repatriation?

A. Application for necessary permission for remittance of sale proceeds should be made in Form IPI 8 to the Central Office of the Reserve Bank of India at Mumbai within 90 days of the sale of the property.

 

Q. Can foreign citizens of Indian origin acquire commercial properties in India?

A. Yes. Under the general permission granted by the Reserve Bank of India properties other than agricultural land/farm house/plantation property can be acquired by foreign citizens of Indian origin provided the purchase consideration is met either out of inward remittances in foreign exchange through normal banking channels or out of funds from the purchaser's NRE/FCNR accounts maintained with banks in India and a declaration is submitted to the Central Office of the Reserve Bank of India in Form IPI 7 within a period of 90 days from the date of purchase of the property/final payment of purchase consideration.

 

Q. Can they dispose of such properties?

A. Yes

 

Q. Can sale proceeds of such property be remitted out of India?

A. Yes. Repatriation of original investment in respect of properties purchased by foreign citizens of Indian origin on or after May 26, 1993 will be allowed to be remitted up to the consideration amount originally remitted from abroad provided the property is sold after a period of three years from the date of the final purchase deed or from the date of payment of final of consideration amount, whichever is later. Applications for the purpose are required to be made to the Central Office of the Reserve Bank of India within 90 days of the sale of property in Form IPI 8.

 

Q. Can the properties (residential/commercial) be given on rent if not required for immediate use?

A. Yes. The Reserve Bank of India has granted general permission for letting out any immovable property in India. The rental income or proceeds of any investment of such income has to be credited to NRO account.

 

Q. Can NRIs obtain loans for acquisition of a house/flat for residential purpose from financial institutions providing housing finance?

A. The Reserve Bank of India has granted general permission to certain financial institutions providing housing finance. HDFC, LIC Housing Finance Ltd., etc., to grant housing loans to non-resident Indian nationals for acquisition of a house/flat for self-occupation subject to certain conditions.

 

Q. Can an dealer grant loans to NRIs for acquisition of a flat/house for residential purposes?

A. Dealers have been granted permission to grant loans to non resident Indian nationals for acquisition of house/flat for self-occupation on their return to India subject to conditions. Repayment of the loan should be made within a period not exceeding 15 years out of inward remittance though banking channels or out of funds held in the  investors' NRE/FCNR/NRO account.

 

Q. Can Indian companies grant loans to their NRI staff?

A. The Reserve Bank of India permits Indian firms/companies to grant housing loans to their employees deputed abroad and holding Indian passport subject to certain conditions.

 

Q. Can an dealer grant housing loan to non-residents of Indian nationality where he is a principal borrower with his resident close relative as a co-obligate/ guarantor, or where the land is owned jointly by such NRI borrower with his resident close relative?

A. Yes. However, in such cases the payment of margin money and repayment of the loan installments should be made by the NRI.

 

Q. What are the conditions required to be fulfilled for repatriation of sale proceeds?

A. Applications for repatriation of sale proceeds are considered provided the sale takes place after three years from the date of final purchase deed or from the date of payment of final of consideration amount, whichever is later.