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RBI Guidelines |
Frequently Asked Questions (FAQs) |
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Acquiring
immovable property in India by persons resident
outside India is regulated in terms of Section
6(3) (i) of the Foreign Exchange Management
Act (FEMA), 1999 as well as by the regulations
contained in Notification issued by RBI
viz Notification No FEMA. 21/2000-RB dated
May 3, 2000, as amended from time to time.
The persons resident outside India are categorized
as Non- Resident Indians (NRIs) or a foreign
national of Indian Origin (PIO) or a foreign
national of non-Indian origin. A person
resident in India who is not a citizen of
India is also covered by the relevant Notifications. |
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Statutorily,
under the provisions of Section 6(5) of
FEMA 1999, a person resident outside India
can hold, own, transfer or invest in Indian
currency, security or any immovable property
situated in India if such currency, security
or property was acquired, held or owned
by such person when he was a resident in
India or inherited from a person who was
a resident in India. |
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The regulations
under the Notification No FEMA 21 dated
May 3, 2000 permit a NRI or a PIO to acquire
immovable property in India other than agricultural
land or, plantation property or farm house.
Further, foreign companies who have been
permitted to open an office in India are
also allowed to acquire any immovable property
in India, which is necessary for or incidental
to carrying on such activity. This stipulation
is not available to entities which are permitted
to open liaison offices in India. |
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The relevant
regulations covering the transactions in
immovable property have been notified vide
RBI Notification No. FEMA 21/2000-RB dated
May 3, 2000 and this basic notification
has been subsequently amended by the notifications
detailed below: |
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Notification No.FEMA 64/2002-RB
dated June 29, 2002 |
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Notification No.FEMA 65/2002-RB dated
June 29, 2002 |
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Notification No.FEMA 93/2003-RB dated
June 9, 2003 and |
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Notification No. FEMA 146/2006-RB
dated February 10 2006 (available with
A.P.(DIR Series) Circular No. 5 dated
16.8.2006 on website) |
All the above notifications
are available on RBI website:
www.fema.rbi.org.in |
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The restrictions
on acquiring immovable property in India
by a person resident outside India would
not apply where the immovable property is
proposed to be acquired by way of a lease
for a period not exceeding 5 years or where
a person is deemed to be resident in India.
In order to be deemed to be a person resident
in India, from FEMA angle, the person would
need to comply with the criterion for residency
as defined in Section 2(v) of FEMA 1999.
However, citizens of Pakistan, Bangladesh,
Sri Lanka, Afghanistan, China, Iran, Nepal
or Bhutan cannot acquire or transfer immovable
property in India, (other than on lease,
not exceeding five years) without prior
permission of the Reserve Bank. |
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NRIs/PIO
are allowed to repatriate an amount up to
USD one million, per financial year (April-March),
out of the balances held in the NRO account
subject to tax compliance. This amount includes
sale proceeds of assets acquired by way
of inheritance or settlement. |
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While
the statutory and regulatory provisions
are indicated above, we have been receiving
several queries from individuals on operational
procedures regarding acquisition, holding
and transferring of immovable property in
India and repatriating / remitting the proceeds
arising from sale of such property. In order
to clarify these issues, we have attempted
a set of FAQs on various issues relating
to acquisition and transfer of immovable
property in India by a person resident outside
India and a person resident in India who
is not a citizen of India. |
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In case there are other issues
to be resolved, a reference may be made to
the |
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Chief General Manager-in-Charge,
Foreign Exchange Department,
Foreign Investment Division,
Reserve Bank of India,
Central Office,
Mumbai- 400 001. |
Under the general permission available, the following categories can freely purchase immovable property in India:
i) Non-Resident Indian (NRI)- that is a citizen of India resident outside India
ii) Person of Indian Origin (PIO)- that 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
1. at any time, held Indian passport, or
2. who or either of 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 purchase of agricultural land / plantation property / farm house in India.
No. 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 of Reserve Bank and the proposals are considered in consultation with the Government of India.
No. An NRI / PIO who has purchased residential / commercial property under general permission, is not required to file any documents with the Reserve Bank.
There are no restrictions on the number of residential / commercial properties that can be purchased.
No. A foreign national of non-Indian origin, resident outside India cannot purchase any immovable property in India. But, he / she may take residential accommodation on lease provided the period of lease does not exceed five years. In such cases, there is no requirement of taking any permission of or reporting to Reserve Bank
Yes, but the person concerned would have to obtain the approvals, and fulfil the requirements if any, prescribed by other authorities, such as the concerned State Government, etc However, a foreign national resident in India who is a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan would require prior approval of Reserve Bank. Such requests are considered by Reserve Bank in consultation with the Government of India
A foreign company which has established a Branch Office or other place of business in India, in accordance with FERA / FEMA regulations, can acquire any immovable property in India, which is necessary for or incidental to carrying on such activity. The payment for acquiring such a property should be made by way of foreign inward remittance through proper banking channel. A declaration in form IPI should be filed with Reserve Bank within ninety days from the date of acquiring the property. Such a property can also be mortgaged with an Authorised Dealer as a security for other borrowings. On winding up of the business, the sale proceeds of such property can be repatriated only with the prior approval of Reserve Bank. Further, acquisition of immovable property by entities who had set up Branch Offices in India and incorporated in Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan would require prior approval of Reserve Bank to acquire such immovable property. However, if the foreign company has established a Liaison Office, it can not acquire immovable property . In such cases, Liaison Offices, can take property by way of lease not exceeding 5 years.
(a) Yes, NRIs and PIOs can freely acquire immovable property by way of gift either from
i) a person resident in India or
ii) an NRI or
iii) a PIO.
However, the property can only be commercial or residential. Agricultural land / plantation property / farm house in India cannot be acquired by way of gift.
(b) A foreign national of non-Indian origin resident outside India cannot acquire any immovable property in India through gift.
A person resident outside
India (i.e. NRI or PIO or foreign national of non-Indian
origin) can inherit immovable property from
(a) a person resident
in India.
(b) a person resident outside India
However,
the person from whom the property is inherited
should have acquired the same in accordance with
the foreign exchange regulations applicable at
that point of time.
(a)
NRI can sell property in India to-
i) a person resident in India or
ii) an NRI or
iii) a PIO.
(b) PIO can sell property in India to
i) a person resident in India.
ii) an NRI or
iii) a PIO – with the prior approval of
Reserve Bank
(c ) Foreign national of non-Indian origin including
a citizen of Pakistan or Bangaladesh or Sri Lanka
or Afghanistan or China or Iran or Nepal or Bhutan
can sell property in India with prior approval
of Reserve Bank to
i) a person resident in India
ii) an NRI
iii) a PIO
(a) NRI / PIO may sell agricultural land /plantation property/farm house to a person resident in India who is a citizen of India.
(b) Foreign national of non-Indian origin resident outside India would need prior approval of Reserve Bank to sell agricultural land/plantation property/ farm house in India
Yes.
(a) NRI / PIO may gift residential / commercial
property to -
(i) person resident in India or
(ii) an NRI or
(iii) PIO.
(b) foreign national of non-Indian origin needs
prior approval of Reserve Bank.
(a) NRI / PIO can gift
but only to a person resident in India who is a
citizen of India.
(b) foreign national of non-Indian origin needs
prior approval of Reserve Bank
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.
Payment can be made by NRI / PIO out of(a) funds remitted to India through normal banking channel or (b) funds held in NRE / FCNR (B) / NRO account maintained in India
No payment can be made either by traveller’s cheque or by foreign currency notes. No payment can be made outside India.
The amount of refund, together with interest (net of income tax) can be credited to NRE account. This is subject to condition that the original payment was made by way of inward remittance or by debit to NRE / FCNR (B) account. (Please refer to A.P. (DIR) Series Circular No. 46 dated 12.11.2002)
Yes, such loans are subject to the terms and conditions as laid down in Schedules 1 and 2 to Notification No. FEMA 5/2000-RB dated May 3, 2000 as amended from time to time. However, banks cannot grant fresh loans or renew existing loans in excess of Rupees 20 lakh against NRE and FCNR
(B) deposits either to the depositors or to third parties [cf. A.P. (DIR Series) Circular No. 29 dated January 31, 2007].
Such loans can be repaid
(a) by way of inward remittance through normal banking channel or
(b) by debit to his NRE / FCNR (B) / NRO account or
(c) out of rental income from such property.
(d) by the borrower's close relatives, as defined in section 6 of the Companies Act, 1956, through their account in India by crediting the borrower's loan account.
Repatriation:
(a).
In case the amount has been received from inward
remittance or debit to NRE/FCNR(B)/NRO account
for acquiring the property or for repayment of
the loan, the principal amount can be repatriated
outside India.
For this purpose, repatriation
outside India means the buying or drawing of foreign
exchange from an authorised dealer in India and
remitting it outside India through normal banking
channels or crediting it to an account denominated
in foreign currency or to an account in Indian
currency maintained with an authorised dealer
from which it can be converted in foreign currency
(b)
in case the property is acquired out of Rupee
resources and/or the loan is repaid by close relatives
in India ( as defined in Section 6 of the Companies
Act, 1956), the amount can be credited to the
NRO account of the NRI/PIO. The amount of capital
gains, if any, arising out of sale of the property
can also be credited to the NRO account.
NRI/PIO are also allowed by the
Authorised Dealers to repatriate an amount up
to USD 1 million per financial year out of the
balance in the NRO account for all bonafide purposes
to the satisfaction of the authorised dealers,
subject to tax compliance.
Yes, NRI/PIO can avail of housing loan in rupees from an Authorised Dealer or housing finance institution subject to certain terms and conditions. (Please refer to Regulation 8 of Notification No. FEMA 4/2000-RB dated 3.5.2000 and A.P. (DIR) Series Circular No. 95 dated April 26, 2003).
Such a loan can be repaid
(a) by way of inward remittance
through normal banking channel or
(b) by debit to his NRE / FCNR (B) / NRO account
or
(c) out of rental income from such property.
(d) by the borrower's close relatives, as defined
in section 6 of the Companies Act, 1956, through
their account in India by crediting the borrower's
loan account.
Yes,
subject to certain terms and conditions (Please
refer to Regulation 8A of Notification No. FEMA
4/2000-RB dated May 3, 2000 and A.P. (DIR Series)
Circular No.27 dated October 10, 2003).
NRI / PIO may repatriate the sale proceeds of immovable property in India
(a) 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:
1. in foreign exchange received through normal
banking channel or
2. by debit to NRE account(foreign currency equivalent,
as on the date of payment) or debit to FCNR (B)
account.
Repatriation of sale proceeds
of residential property purchased by NRI / PIO
out of 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 NRI/PIO
may repatriate an amount up to USD one million,
per financial year, as discussed below.
(b) If the property was acquired
out of Rupee sources, NRI or PIO may remit an
amount 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
From the NRO account, NRI/PIO may repatriate up to USD one million per financial year (April-March), which would also include the sale proceeds of immovable property.
Yes, provided the loan has been subsequently repaid by remitting funds from abroad or by debit to NRE/FCNR(B) accounts (Please see A.P. (DIR) Series Circular No. 101 dated 5.5.2003)
Yes, sale proceeds of not more than two residential properties can be repatriated.
The sale proceeds of immovable property acquired by way of gift should be credited to NRO account only. From the balance in the NRO account, NRI/PIO may remit up to USD one million, per financial year, subject to the satisfaction of Authorised Dealer and payment of applicable taxes.
Yes, general permission is available to the NRIs/PIO to repatriate the sale proceeds of the immovable property inherited from a person resident in India. NRIs/PIO may repatriate an amount not exceeding USD one million, per financial year, on production of documentary evidence in support of acquisition / inheritance of assets, an undertaking by the remitter and certificate by a Chartered Accountant in the formats prescribed by the Central Board of Direct Taxes vide their Circular No.10/2002 dated October 9, 2002. [cf. A. P. (DIR Series) Circular No.56 dated November 26, 2002].
In case of a foreign national,
sale proceeds can also be repatriated even if
the property is inherited from a person resident
outside India. But this is allowed only with prior
approval of Reserve Bank. The foreign national
has to approach Reserve Bank with documentary
evidence in support of inheritance of the immovable
property and the undertaking and the C.A. Certificate
as mentioned above.
The general permission for repatriation
of sale proceeds of immovable property is not
available to a citizen of Pakistan, Bangladesh,
Sri Lanka, China, Afghanistan and Iran and he
has to seek specific approval of Reserve Bank.
As FEMA specifically permits
transactions only in Indian Rupees with citizens
of Nepal and Bhutan, the question of repatriation
of the sale proceeds in foreign exchange to Nepal
and Bhutan would not arise.
Yes, Foreign Embassies / Diplomats / Consulate Generals can purchase and sell any immovable property other than agricultural land / plantation property / farm house in India with prior clearance from the Government of India, Ministry of External Affairs. The payment should be made by foreign inward remittance through normal banking channel.
Yes,
NRI/PIO can rent out the property without the
approval of the Reserve Bank. Rent
received can be credited to NRO / NRE account
or remitted abroad. Powers have been delegated
to the Authorised Dealers to allow repatriation
of current income like rent, dividend, pension,
interest, etc. of NRIs / PIO who do not maintain
an NRO account in India based on an appropriate
certification by a Chartered Accountant, certifying
that the amount proposed to be remitted is eligible
for remittance and that applicable taxes have
been paid/provided for. [cf. A.P. (DIR Series) Circular No. 45 dated May
14, 2002].
Yes, he can continue to hold the residential / commercial property / agricultural land/ plantation property / farm house in India without the approval of the Reserve Bank.
The sale proceeds may be credited to NRO account.
Yes,
provided the amount to be remitted does not exceed
USD one million per financial year, for all bonafide
purposes to the satisfaction of Authorised Dealers
and subject to tax compliance.
Yes, they may continue to hold the immovable property. However, they can transfer the property only with the prior approval of Reserve Bank.
A person resident in India who is a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan is governed by the provisions of Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000 ie. he would require prior approval of Reserve Bank for acquisition and transfer of immovable property in India even though he is resident in India. Such requests are considered by Reserve Bank in consultation with the Government in India
Section 2 (v) and Section 2 (w) of the FEMA, 1999 defines 'person resident in India' and a 'person resident outside India' respectively.
Under FEMA, a person resident in India is defined as a person residing in India for more than one hundred and eighty-two days during the course of the preceding financial year (April-March) and who has come to or stays in India either for taking up employment, carrying on business or vocation in India or for any other purpose, that would indicate his intention to stay in India for an uncertain period. In other words, to be treated as 'a person resident in India' under FEMA, a person has not only to satisfy the condition of the period of stay (being more than 182 days during the course of the preceding financial year) but has also to comply with the condition of the purpose / intention of stay.
The Act defines a 'a person resident outside India' as a person who is not a person resident in India' (As defined in Q.No. 37 above)
Reserve Bank does not determine the residential status. Under FEMA, residential status is determined by operation of law. The onus is on an individual to prove his / her residential status, if questioned by any authority.
A foreign national resident in India does not require approval from Reserve Bank from FEMA angle, but approvals if any required in terms of regulations prescribed by other authorities such as the concerned State Government etc. will have to be obtained by him / her. However, a foreign national resident in India who is a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan requires specific prior approval of Reserve Bank.
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