Who is a NRI?
- By the RBI definition an NRI (Non Resident Indian) is a person residing outside India,
- who is a citizen of India or is a person of Indian origin.
Who is a PIO?
By the RBI definition a PIO (Person of Indian Origin) means an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan) who
(i) at any time, held an Indian Passport or (ii) who or either of whose father or mother or whose grandfather or grandmother was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955); or (c) the person is a spouse of an Indian citizen or a person referred to in sub-clause (a) or (b).
Is permission required to acquire immovable property in India?
No. NRIs and PIOs can acquire immovable residential or commercial property in India without any permission.
What is the process to pay for the acquired immovable property?
NRIs and PIOs should either acquire immovable property through inward remittances in foreign exchange or through the NRE/FCNR bank accounts maintained with banks in India.
Can the acquired immovable property be rented out?
Yes. NRIs and PIOs are allowed to rent out the acquired immovable property without any restrictions. The rent amount can also be remitted outside India without any permission.
What are the tax implications for NRIs and PIOs on purchase, sale or rent of the acquired property?
There aren’t any tax implications for NRIs and PIOs on the purchase of immovable properties in India but any income earned from renting or selling the property is taxable.
Can the proceeds of a sale be remitted out of India?
Yes. The proceeds of the sale are remitted out of India to the home country of the NRI and PIO up to the amount originally remitted from abroad to purchase the property. The property can be sold only after three years of acquisition.
What are the RBI guidelines for loans to NRIs and PIOs?
The loan amount shall not exceed 85% of the cost of the acquired immovable property. Rest of the loan amount can be financed by the NRI and PIO through NRE/FCNR bank accounts in India. Repayment of the loan amount must also be done through the same
Who can purchase immovable property in India?
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 • At any time, held Indian passport, or 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.
an NRIs sell the properties they hold in India without Reserve Bank’s permission?
Can NRIs acquire or dispose residential property by way of gift?
Yes, the Reserve Bank has granted general permission to NRIs to acquire or dispose of NRI India Properties by way of gift from or to a relative who may be an Indian citizen or a person of Indian origin (PIO) whether resident in India or not.
Can NRIs obtain loans for acquisition of a house / flat for residential purpose from financial institution providing housing finance?
The Reserve Bank has granted some general permission to certain financial institutions providing housing finance e.g. HDFC, LIC Housing Finance Ltd., etc, and authorized dealers to grant housing loans to NRI nationals for acquisition of a NRI house/flat for self-occupation subject to certain conditions. Criteria regarding the purpose of the loan, margin money and the quantum of loan will be at par with those applicable to resident Indians. Repayment of the loan should be made within a period not exceeding 15 years, out of inward remittance through banking channels or out of funds held in the investors’ NRE/FCNR/NRO accounts.
What is the loan sanction process and it’s documentation?
- Passport and Visa
- A copy of the appointment letter and contract from the company employing the applicant.
- The labour card/identity card (translated in English and countersigned by the consulate) if the person is employed in the Middle East Salary certificate (in English) specifying name, date of joining, designation and salary details.
- Bank Statements for the last six months
The documentation required to be submitted by the NRIs are different from the Resident Indians as they are required to submit additional documents, like copy of the passport and a copy of the works contract, etc. and of course NRIs have to follow certain eligibility criteria in order to get Home Loans in India. Another vital document required while processing an NRI home loan is the power of attorney (POA). The POA is important because, since the borrower is not based in India; the Home Finance Company would need a ‘representative’ ‘in lieu of’ the NRI to deal with and if needed. Although not obligatory, the POA is usually drawn on the NRI’s parents/wife/children/ close relatives or friends. The documents needed for obtaining NRI home loans are Bank specific. General list of documents are as mentioned below:
List of Classified documents for Salaried and Self Employed NRI Applicants. Banks may have specific requirements apart from the below listed documents.
- Salaried NRI Applicants:
- Copy of valid passport showing VISA stamps
- Copy of valid visa / work permit / equivalent document supporting the NRI status of the proposed account holder
- Overseas Bank A/C for the last 3 months showing salary credits
- Latest contract copy evidencing Salary / Salary Certificate / Wage Slips
- Self-Employed NRI Applicants:
- Passport copy with valid visa stamp
- Brief profile of the applicant and business/ Trade license or equivalent document
- 6 months overseas bank account statement and NRE/ NRO account
- 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)
Can such property be sold without the permission of Reserve Bank?
Yes. Reserve Bank has granted general permission for sale of such property. However, where another foreign citizen of Indian origin purchases the property, funds towards the purchase consideration should either be remitted to India or paid out of balances in non-resident accounts maintained with banks in India.
NRIs and Persons of Indian Origin (POI) can acquire immovable property in India other than agricultural property, plantation or a farmhouse. The Reserve Bank of India (RBI) states NRIs and PIO purchasing immovable property in India, can pay for the acquisition by funds received in India through normal banking channels by way of inward remittance from outside the country.
The home loan amount should not exceed 85% of the cost of the dwelling unit, as the remaining amount that is 15% needs to be provided as an own contribution towards the cost of unit financed.The cost of the dwelling unit which is own contribution, less the loan amount, can be met from direct remittances from abroad through normal banking channels, the Non-Resident (External) [NR(E)] Account and /or Non-Resident (Ordinary) [NR (O)] account in India. However, repayment of the loan, comprising of the principal and interest including all the charges are to be remitted to the HFC from abroad through normal banking channels, the Non-Resident (External) [NR(E)] Account and /or Non-Resident (Ordinary) [NR (O)] account in India. The repayment option for NRIs is they can pay through the funds held in any non-resident account maintained in accordance with the provisions of the Foreign Exchange Management Act, 1999, and the regulations made by the RBI from time to time.