Jigar M. Patel
International Tax Attorney
Q.1. Is a Non Resident Indian (NRI) eligible to invest in residential or commercial property in India?
A.1. Under the general permission granted by the Reserve Bank of India (RBI), every NRI being a citizen of India or a Person of Indian Origin (PIO), that is an individual who at any time, held Indian passport, or who or either of whose father or grandfather was a citizen of India is eligible to freely invest in any residential or commercial property in India, including non-agricultural land. There is no restriction on the number of residential/commercial properties that can be purchased by an NRI in India. No filing of documents before the RBI is required after the purchase, since this is covered under the general permission.
Q.2. What are the regulations governing an NRI for purchase or sale of agricultural property in India?
A.2. The general permission of the RBI, as referred to hereinabove, for acquisition of immovable properties does not cover permission to acquire agricultural land, plantation or farm house. However, an NRI can continue to hold the same, if it was acquired by him while he was a resident of India. Such agricultural property held by an NRI can be sold, but only to a person resident in India, who is a citizen of India.
The restriction for investment in agricultural property is applicable to an NRI, even if he is an Indian citizen. At the same time, if an individual, though being a foreign citizen of Indian origin, is resident in India, he can invest in agricultural property without any restrictions.
Q.3. Can an NRI acquire immovable property in India through gift or inheritance?
A.3. An NRI can freely acquire an immovable property, other than an agricultural land in India, by way of gift or inheritance, either from a person resident in India or from another NRI. However, an agricultural land, plantation or farm house in India cannot be acquired by way of a gift by an NRI. The same can only be received by way of inheritance or through succession under a Will.
Q.4. Can an NRI repatriate the rental income or sale proceeds of his immovable property?
A.4. RBI has granted general permission to NRIs for repatriation outside India of up to USD 1 million per financial year, out of the balances held in their NRO accounts for any bonafide purpose. Under this scheme, an NRI can freely repatriate outside India the rental income or sale proceeds of his immovable property, subject to payment of applicable taxes and based on appropriate certification by a Chartered Accountant.
Q.5. Tax aspects to keep in mind for NRIs on buying/selling immovable property.
A.5. When an NRI sells property, the buyer is required to deduct TDS under the provisions of Section 195. NRIs are entitled to claim exemption from long-term capital gains, arising on sale of property under Sections 54 to 54F, fulfilling the relevant conditions prescribed therein, just as in the case of a resident individual.
In case of purchase of an immovable property by an NRI from a resident in India, the consideration of which exceeds Rs. 50 lakhs, he would be required to deduct TDS under the provisions of Section 194IA.
