The Legality Of Ownership Of NRI’s Property

Nowadays, the real estate market in India has become very conducive for NRI. However, it is seen that there is still some hesitation in investors due to legal implications.

Legality Of Ownership Of NRI’s Property

If the NRI is a first-time investor then he may have any queries relating to it and they faced a lot of problems in finding the answers.

Not all but we will explain the answers of most of the common problems that the NRI investor faced 

  1. Can an NRI use a Will to transfer the property in India to any other person whether such another person is an NRI or a resident Indian?

Yes, NRIs can certainly transfer the property to anyone which he has received through the will. The NRI can inherit any kind of immovable property in India, whether residential or commercial or agricultural land or a farmhouse 

It may possible that NRI’s Property has been received from any other NRI or resident of India by inheritance. Although, in this case, it is necessary to take the permission of RBI’s permission if the NRI’s property is being inherited by any other NRI i.e. citizen of a foreign state and is a resident outside India.

  1. If the NRI has gifted the property to any person then what are the statutory charges levied on such gifted property?

Fist of all, let’s clarify again that an NRI has a free right to gift his residential and commercial property to any resident person or another NRI. Although, if the property is agricultural land, plantation property or a farmhouse than it can be gifted only to a citizen of India residing in India. 

As per Income Tax Act, 1961, Where the Gifts have been received from relatives are not taxed as per section 56(2)(x) read with section 47 but they have to pay the stamp duty and registration charges at the time of registration. As per the above-specified section, Relatives include a spouse, brother or sister, brother or sister of the spouse, brother or sister of either of the parents and any lineal ascendant or descendant of self or spouse. Also, if the gift has been received on the occasion of marriage or from a registered trust, then it shall be exempted from tax.

It has been noticed that Some NRIs are more interested in the Indian real estate investment through companies as they formed on the foreign company or they may work for the foreign company which is engaged in real estate in India.

  1. Whether it is possible for an overseas company or a subsidiary company outside India to invest in Indian real estate? 

Yes, it is definitely possible for them to invest in the real estate market through the automatic route in the construction development segment and which includes built-up infrastructure, township housing. Although, they cannot invest in finished buildings.

  1. What is the procedure to repatriate funds on real estate investment earned through rental income or proceeds on sale?

Although in this case, the law is lenient still investor has to comply with some provisions.

Where the total proceeds are within the set limit of USD1 million in a fiscal year till then there is no restriction that has been imposed on NRIs for repatriating rental income or even NRI’s property sale proceeds except on other than agricultural land, a farmhouse, and plantation property. 

For the income earned other than above there are some conditions has been prescribed which are as follows:

– The NRI’s property which has been sold that should be acquired as per the foreign exchange regulations.

– The amount of sale which wants to be repatriated by the seller, such amount cannot exceed the cost of the sale proceeds.

– NRI can sell repatriate the amount of the sale proceeds, a maximum of two residential properties.

– The Funds can be repatriated only after payment of all the applicable taxes and other applicable charges.

Note: If the NRI’s property was purchased with money in NRE/FCNR/NRO account then the investor is eligible for the repatriation of the entire principal outside India immediately when the amount deposited in the NRO account.

NRI property

For repatriation, the NRI will have to get a certificate from a Chartered Accountant (CA) in India, in Form 15CB. This form can be easily downloaded from the Income Tax website. It is used for the verification that confirmed that the money acquired was through legal channels and all the taxes on this, has already been paid. The Chartered Accountant verifies and signs the form.

Now, the next step is to fill the Form 15CA. The form will have to be submitted online and once the form has been submitted, an acknowledgment number shall be automatically generated and displayed. The NRI will take the print out of filled Form 15CA and sign it.

The final step is to take the sign of a Chartered Accountant on a CA certificate and give it to the bank where such NRI has an NRO account. Then, the bank shall verify the form and transfer the money abroad (up to $1 million in an FY). Other then this form, Bank shall also ask for a copy of the sale document of the property. In case, the property was inherited then the bank shall take the legal heir certificate, Will copy, and death certificate of the person on whose death the property was inherited.

  1. What is the procedure for the verification of that the Indian property is legally compliant in all respects?

It is necessary that at the time of purchase of property, NRI shall pay attention to some factors like compliances to be followed during construction, environmental clearances, etc. In the real estate market, the laws may differ from state to state and there is no one-size-fits-all response.

Hence it is advisable for NRI that before buying a property in India, He should take consultation with a Chartered Accountant or a lawyer and examine all the legal documents to verify their authenticity. 

He should also check whether there is a requirement for the project to take the registration under RERA and if yes, then whether the said builder has taken the registration. You can easily verify it through the RERA website which is different in each state. 

  1. What to do, if there is a dispute related to NRI’s property investment in India?

First, it is not advisable to file a property dispute anywhere else other than the place of the jurisdiction where the property is located. They should file the case to the court in that jurisdiction can try a property-related case.

Under RERA, the investor may complain about the Delays in the construction process and if the project is not registered under RERA then to the Consumer Protection Act of 1986. 

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