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Monday, 31 August 2015

REPATRIATION OF SALE OF IMMOVABLE PROPERTY

REPATRIATION OF SALE OF IMMOVABLE PROPERTY

  • A person referred to in sub-section (5) of Section 6 of the Act, or his successor shall not, except with the prior permission of the Reserve Bank, repatriate outside India the sale proceeds of any immovable property referred to in that sub-section
  • In the event of sale of immovable property other than agricultural land/farm house/plantation property in India by a person resident outside India who is a citizen of India (NRI) or a person of Indian origin (PIO), the authorised dealer may allow repatriation of the sale proceeds outside India, provided the following conditions are satisfied, namely
    • The immovable property was acquired by the seller in accordance with the provisions of the foreign exchange law in force at the time of acquisition by him or the provisions of these Regulations
    • The amount to be repatriated does not exceed
      • The amount paid for acquisition of the immovable property in foreign exchange received through normal banking channels or out of funds held in Foreign Currency Non-Resident Account or
      • The foreign currency equivalent ,as on the date of payment, of the amount paid where such payment was made from the funds held in Non-Resident External account for acquisition of the property.
  • In the case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties.
  • In the case of the sale of an immovable property, other than an agricultural land/farm house/ plantation property in India by an NRI or PIO, repatriation of the sale proceeds outside India (including credit to RFC, NRE or FCNR Accounts), is allowed.
  • Sale proceeds of any immovable property inherited by NRI/PIO from a person resident in India may be remitted abroad but the amount not to exceed USD one million, per calendar year subject to production of documentary evidence in support of inheritance and Tax clearance certificate/no objection certificate from Income Tax authority to authorized dealer for remittances.
  • The RBI has also now permitted authorized dealers to allow the facility of repatriation of funds by NRI/PIO in their Non-resident Ordinary Rupee (NRO) Account up to US $ 1,00,000 per year representing the sale proceeds of the immovable property held by them for a period of not less than 10 years subject to payment of the applicable taxes.
Prohibition on acquisition or transfer of immovable property in India by citizens of certain countries.
No person being a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan without prior permission of the Reserve Bank shall acquire or transfer immovable property in India, other than lease, not exceeding five years.
General information regarding real estate:
  • NRIs and PIOs may acquire any immovable property for residential/commercial purposes in India, other than agricultural/plantation/farm house, without the permission of Reserve Bank of India.
  • No declaration is required to be made to the RBI. Only information regarding details of the property and costs incurred should be given to the RBI. This will help at the time of repatriation.
  • No permission from the RBI is required to transfer any immovable property other than the agricultural land or plantation property or a farm house in India by way of sale to a person resident in India.
  • The lock-in period of 3 years has been done away with.
  • If property has been acquired through NRE account then repatriation is allowed only for 2 residential properties.
  • NRI/PIO is permitted to transfer by way of mortgage his residential commercial property in India to an authorized dealer/housing finance institution in India.
  • NRI/PIO can avail housing loan in rupees from an authorized dealer or housing finance institution in India approved by the National Housing Finance Bank for purchase of residential accommodation or for the purpose of repairs/renovation/improvement of residential accommodation, subject to certain terms and conditions.
  • Sale proceeds of residential/commercial property received by way of gift by NRI/PIO can only be credited to NRO account.
  • Sale proceeds of any immovable property in India inherited, by a person resident outside India (i.e. NRI or PIO or foreign national of non-Indian origin resident outside India), from a person resident outside India cannot be repatriated by him or his successor without prior permission of the RBI.
  • NRI/PIO can rent out the residential/commercial property purchased out of foreign exchange/rupee funds.
  • 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.
  • The non-resident Indians who are staying abroad may enter into an agreement through their relatives and/or by executing the Power of Attorney in their favour as it is not possible for them to be present for completing the formalities of purchase (negotiating with the builder or Developer, drafting and signing of agreements, taking possession, etc.) These formalities can be completed through some known person who can be given the Power of Attorney for this purpose. Power of Attorney should be executed on the stamp paper before the proper authorities in foreign countries. Power of Attorney cannot be drafted on the stamp paper bought in India.
  • Residential property can be given on rent if not required for immediate residential use. Rental income cannot be remitted abroad and will have to be credited to the ordinary non-resident rupee account of the owner of the property.
Tax rules
  • No taxes to be paid while purchasing property.
  • Certain taxes to be paid when selling property. If NRI/PIO has held property for less than 3 years then he would have to pay 30% tax. If property has been held for more than 3 years then tax payable is 20%. Tax is payable on rental income too.At the time of renting out property or repatriation PAN card is required.
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