Acquisition & Transfer of Immovable Property : FEMA & International Taxation Perspective

In today’s scenario, acquisition & transfer of immovable property is not a big cup of tea but because of some previous years, there are so many restrictions and compliances to be followed in acquisition and transfer of immovable property like levy of various stamp duty rates as applicable in different states, registry, consideration and so on. As per recent amendments and notifications, Non-Resident Indians are allowed for acquisition & transfer of immovable property in India but subject to some restrictions like not acquisition or transfer of agricultural land, farmhouses, and plantation property.

Buying property from nri seller

An NRI can also transfer the immovable property other than farm property or agricultural land or plantation property to:-

  • NRI
  • Person of Indian origin resident outside India
  • A person resident in India

Modes of consideration:-

Payment of Consideration can be made through:-

1.Normal banking channels which funds received in India by inward remittance from any place outside India.

2.Funds held in the non-resident account (NRS) as per the rules and regulations made thereunder.

However, no payment of transfer can be made through traveler cheque or by foreign currency notes or any mode specified there under.

Provided that, an NRI who purchased the residential or commercial property in general permission is not required to file any documents with the Reserve Bank of India (RBI).

Ways of Acquisition:-

Gift:-

Nonresident Indian can acquire the immovable property in India as a gift from a person resident in India, NRI or OCI who can either be relatives which are defined as per section 2(77) of the Companies Act, 2013 but from the International perspective the definition as per Income Tax, 1961 should also be noted, or friends. As an exception, he cannot acquire immovable property like farmhouses, agricultural land, and plantation property.

Inheritance:-

Nonresident Indians can acquire the immovable property in India through inheritance from a person resident in India, resident outside India who had acquired such property as per Foreign exchange provisions, rules, and regulations.

nri Sell Property

Provided that, a Nonresident Indian can acquire the agricultural land, farm property, or plantation property if he acquires through inheritance only. However, he can not repatriate the income or sale proceeds outside India from such sources.

An NRI or PIO may remit outside India not exceeding US $ 1,000,000 per financial year out of the balances of NRO accounts/ sale proceeds of assets by way of purchase/ the assets acquired by him by way of inheritance in India/ legacy/ rupee funds.

Joint acquisition by the spouse:-

A person resident outside India not being an NRI or OCI, who is a spouse of NRI or OCI can acquire the immovable property in India other than farm property, agricultural land, or plantation land with the spouse who is NRI or OCI. But there is a condition that the marriage must be in substance since the period of 2 years otherwise it shall not allow acquiring the immovable property in India.

Provided that, the non-resident spouse is not prohibited from such acquisition.

Provided further that, payment of consideration shall be made through the normal banking channels by way of inward remittance by any place resident outside India or funds in non-resident accounts maintained in accordance with the foreign rules and regulations.

Repatriation of sale proceeds:-

A person or his successor shall not, except with the permission of Reserve Bank of India, repatriate the sale proceeds of the immovable property outside India which is situated in India if such property was held or owned by the person when he is the resident of India or inherit the property from the person resident India. For instance, If a person get an immovable property through inheritance from a person resident in India and sell it and wants to repatriate the sale proceeds outside India then, he has to take the permission of Reserve Bank of India (RBI).

Further provided that, the immovable property acquired by the NRI/OCI should be as per the Foreign rules and regulations and the amount of acquisition shall be in foreign exchange received as per the applicable law and in case of residential property, the repatriation of sale proceeds shall not be restricted to not more than two such properties.

Sale of property:-

NRI can transfer the immovable property other than the agricultural land, farm properties, or plantation properties to any person resident in India. However, he can also transfer agricultural land, plantation property, or farm property only to the citizen of India. He can also transfer the residential or commercial property to a resident of India or residents outside India or NRI or PIO without any hurdles.

Lower TDS Certificate

Acquisition by foreign national:-

Foreign national of non-Indian origin resident outside India cannot acquire any immovable property in India unless such person acquires such property through inheritance from the person resident in India but he can acquire or transfer the property on a lease not exceeding 5 years without the prior permission of Reserve Bank of India (RBI).

Foreign nationals of non-Indian origin resident outside India, other than a citizen of Bangladesh, Macau, Afghanistan, Hong Kong, China, Iran, Nepal, Bhutan, Sri Lanka or Pakistan can acquire the immovable property in India by becoming the resident as per the FEMA provisions, rules and regulations.

If Foreign nationals of non-Indian origin resident outside India have acquired any immovable property in India with the permission of Reserve Bank of India by way of inheritance then, he cannot transfer the immovable property except with the permission of Reserve Bank of India.

International taxation perspective:-

Any transaction under these rules shall be undertaken:-

1.Normal banking channels in India. 

2. Shall be subject to applicable tax laws and other duties.

Acquisition or sale by foreign embassy:-

Foreign embassy or consulates or diplomats can acquire or sell the immovable property in India other than agricultural land/ farmhouse property/ plantation land provided:-

1.clearance from Government of India, Ministry of External Affairs is required for the purchase or sale.

2.the consideration shall be made out of the funds remitted out of abroad through the normal banking channels.

Are you planning to sell your property as an NRI_

Acquisition for doing a permitted activity:-

A branch, office, or other places of business except liaison office can be opened with the requisite approvals wherever necessary for or incidental for carrying out the business activity can acquire the immovable property with the applicable laws, rules, and regulations. The entity or concerned can be required to file the declaration form IPI with the Reserve Bank within 90 days from the date of acquisition. The immovable property can also be used as a mortgaged property for taking the loan.

Conclusion:-

Investment by a resident outside India can be considered as an opportunity for the Indian economy. It has several benefits as it increases the foreign exchange of the Government by which the security market is also boomed which is a sign of efficiency in GDP, an increase in employment, and so on. When the foreign companies come to India then, the investment rate also increased in Indian companies by which the efficiencies of working of the companies is also increased and we can adopt the new technologies by the foreign company and as a result, the stock prices of the company are also increased and the balance sheets also become better after the investments.

Leave a Comment