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EXPERT OPINIONS - REAL ESTATE
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Sections: Tax & Legal | RBI | Real Estate

Can NRIs who are now US citizens:
(a) Buy property in India?
(b) Inherit property from family?

Yes, NRIs who are now US Citizens are Persons of Indian Origin and as such buy or inherit property in India.

If I become an Australian citizen, do I lose rights over my existing property in India and property which I may inherit? What other things can affect me financially?

No. You will not lose any rights over your existing property in India or that you may inherit. Assuming you are presently an Indian Citizen, your status after becoming an Australian citizen, is" "Person of Indian Origin" (POI). Persons of Indian Origin enjoy priviliges for acquiring and disposing of properties (including inherited properties) , as set out in relevant section. Further, assuming that presently your status is NRI, generally, in financial assets (such as deposits with Bank, interest on them, dividend on shares, property etc) will enjoy the same benefits under the law for POI also.

If an NRI buys a residential property in india and rents it out, is the resulting rental income repatriable. Also, are the capital gains resulting from the sale of a residential property in India repatriable?

The rental income, being current account transaction, is repatriable. Repatriation of sale proceeds is subject to certain conditions. The amount of repatriation cannot exceed the amount paid for acquisition of the immovable property in foreign exchange. [For more details refer the relevant section under Real Estate].

Recently I purchased a site in Bangalore as an investment and I would like to sell this after 2-3 years.

    a.What is the procedure to sell?

    There is no prescribed procedure under Foreign exchange Management Act to sell the property. You can sell the property at any time.

    b. Whether I have to pay any tax?

    If there is a gain that you realise in the transaction, you shall pay Capital gains tax Capital gains tax could be long term or short term depending upon whether the property is held for less than 3 years or 3 years or more.

    c. How do I convert back to dollars?

    You may approach bankers for conversion of sale proceeds into dollars. Alternatively, you may open an NRO account with bankers (by simple procedure). Remittance from NRO account is possible up to $ 1 million in respect of sale of immovable property, and, as such, you may not have any difficulty in repatriating the sale proceeds as and when you sell.

    d. Is there any form I need to declare for RBI?

    No. There is no form you need to declare for RBI in this transaction. All that you need to do is to prove to bankers remitting the sale proceeds that the money is out of sale of immovable property only.

I am selling a property in India. As per the information on the Citibank website, I can bring my sale proceeds out from India, whereas I browsed the RBI site which gives the information that the sales proceeds can be repatriated out of India only if the property was held for a period of minimum 10(ten) years. Could you please guide on this issue?

I agree with you that there is confusion in this area. The number of years for which an immovable property is held (called "lock-in period") was initially three years only. Even this 'lock-in period' was removed by Circular No.35 dated November 1, 2002. Later, by Circular No 67 dated January 13, 2003 RBI has permitted remittance out of NRO account, arising out of sale proceeds of immovable properties, held for 10 years, up to $ 1 million. It cannot be the intention of RBI to remove existing lock in (even for 3 years) totally and later impose a longer lock in period of 10 years. I am of the view that you can quote circular 35 and remit the proceeds without any lock in period at all. However, the sale proceeds allowed to be repatriated should not exceed the foreign exchange brought to acquire the property.

Are the entire proceeds of real estate income (including profits from capital gains) repatriable? Is rental income repatriable? What type of account should be used to transfer money for real estate purchase?

The repatriation of Sale proceeds shall not exceed the foreign exchange brought into acquire the property. Yes, rental income is repatriable, subject to taxes. You may purchase the real estate by remitting the money in foreign exchange through normal banking channels. Alternatively, you may open foreign currency account with bankers.

I am an NRI living in USA for more than twenty years. My father had divided up his property in India among family members in 1989, prior to his death in 1995. My share of rent proceeds was deposited in my account in a local (non-NRO) Indian bank. The ownership was passed on to the family members after his death, and rent proceeds were deposited in the same account as mentioned above until the property was sold in 2003. The sale proceeds were also deposited in the same account with the local Indian bank. I recently opened an NRO account and deposited the sale proceeds to the NRO account from the local bank.

    a) Will RBI give me permission to repatriate the sale proceeds to USA?

    Yes. You are entitled to repatriation of sale proceeds. RBI has permitted Authorised Dealers to allow remittance of sale proceeds of inherited assets.

    b) Could you also let me know whether I would have problems since I did not have the ownership of the property for ten years, and I did not deposit the sale proceeds directly to the NRO account? Also, are rules same for the inherited and the non-inherited properties as far as repatriation of sale proceeds is concerned?

    The requirement of ownership for 10 years is under different circular. However, on the very basis of remittance of assets in India acquired by way of inheritance, you are entitled to remit outside India US $ 100,000 per calendar year. For your information the relevant literature is: Notification No.62/2002/RB dated May 13th 2002 / A.P (DIR Series) Circular No.19 dated September 12, 2002. As long as you have clear documentary evidence in support of acquisition of assets by inheritance, a tax clearance or No objection Certificate from the Income Tax authorities, not directly depositing sale proceeds is not a problem, as bona fides and source are established. The limits are separate for inherited and non-inherited properties.

I am currently an NRI working for a government Department in Australia. I am basically from Bangalore and am interested in buying/renovating my current house in B'lore. I am planning to apply for Australian citizenship in Aug 2004. Will I be able to apply for home loans for my Indian house renovation/ purchase? If yes, do I need to personally be there in India or can my relatives start the process right away? I plan to tour India in Dec 2004. Do i need to wait till December?

There is no prohibition under Foreign exchange law to give loans to NRIs. It does not matter if you become Australian citizen, as, you would then be Person of Indian Origin. The loan (for constructing or renovating), interest rates, terms and conditions and procedures are left to Bankers. As long as the repayment is fully secured, the bankers may lend in their ordinary course of their business. It would be appropriate for you to contact bankers for details.

We are in the process of selling a house in India. We have owned the house for the last 30 years. The house was owned by my mother who passed away four years back.

    a) When we sell the house, how much capital gains tax should we pay?

    The sale of the house held for over 30 years will give rise to long-term capital gains. This will be worked out taking the original cost and indexing it to the current levels. The formula for indexation is prescribed. Assuming that the proceeds are not invested in bonds or similar securities the sale price minus the indexed cost will be subject to long-term capital gain at 20% plus surcharge.

    a)Can we repatriate the proceeds to US dollars?

    Yes. You can repatriate the sale proceeds.

    b)What processes are we to follow to get this money repatriated?

    You may furnish the Bankers documentary evidence of inheritance / legacy and necessary tax clearance/ no objection certificate from the Income tax authority and approach bankers for remittance.

    c)Can we deposit the proceeds of the sale to a NRO account and then repatriate? Or do we need to have a NRE account?

    You may open NRO account, as remittance from this account are specifically covered by clear instructions.

    d) Can we open NRE/NRO accounts from the US where we live?

    Yes, you can.

Is it possible for a foreign-based private company 100% owned by NRIs to buy Real Estate in India together with private NRIs? Can the money be repatriable on sale of this property after holding it for three years?

No. If NRI owns more than 60% of shareholding in a corporate entity abroad, then such an entity is an Overseas Corporate Body (OCB). Investment by OCB is banned. Also, as per foreign investment Policy, while real estate development is possible, real estate trading is not permitted.

I came to US in August 2000 and a property was purchased in my name in 2001. I have till date send about $13000 for the property and rest was paid out of my rupee account in India. We are selling the property for the same price we bought it and want to get money repatriated to repay my educational loans here. The total amount is $35000. Should I open a NRE or NRO account and if NRO, do I need RBI permission for repatriation?

General permission is available for repatriation, but only up to that much foreign exchange used for acquiring the property in India. Thus, you may open NRO account, approach bankers for remitting up to $ 13,000 (that is, the foreign exchange used by you to acquire the property in India).

I have got a British nationality at present. I was born in India and had Indian passport previously. Now I would like to purchase a property in India(Delhi). Can you kindly advise me if I can do that or if there are any complications? Do I need to get some sort of permission or do I need to register any where for that?

Persons of Indian Origin are entitled to purchase property (other than agricultural land / farm house / plantation) in India. The purchase shall be out of foreign exchange remitted into India, through normal banking channels. Alternatively, if you have foreign currency account in India, you may use them for purchase. No permission is required, as, RBI has given general permission for such purchase. No registration need to be done, except, the registration of property as per property law of the State.

I am US citizen of Indian origin.

    a) Are there any resrictions for buying real estate (land or buildings) in India. What is the best way to buy these properties?

    Persons of Indian Origin are entitled to purchase property (other than agricultural land / farm house / plantation) in India. The purchase shall be out of foreign exchange remitted into India, through normal banking channels. Alternatively, if you have foreign currency account in India, you may use them for purchase. No permission is required, as, RBI has given general permission for such purchase.

    b)Is the capital gains and rental income from the properties taxable in India?

    Since the income in question arises in India it is taxable in India even if you are a US citizen.

    c)Do I need to acquire PIO or any other permission to buy property in India?

    No permission is needed, as general permission is given by RBI.

    d)What is the best kind of ban account should I open to pay for the property in India?

    You may remit the foreign exchange in normal banking channel. Any type of account with the banker is okay for this purpose. You may contact banker for this purpose.

I bought land near Delhi in 1993 in rupees. No foreign exchange was involved in the transaction. Since 1999 I am based in the UK. I am an Indian citizen.

  1. Can I sell the land and repatriate the rupee sale amount in pounds to myself in the UK?

    Since the property was purchased only in rupees, and not in foreign exchange, you cannot make use of general permission, which is available if only the property is purchased in foreign exchange. You may apply to RBI for special permission for repatriation of such funds.

  2. If the buyer is in the UK, can I accept 90 per cent of the land value here in the UK in pounds, and the rest in India in rupees? If this is possible, I will not need to repatriate any money. Is this possible?

    First of all the buyer should be legally able to purchase the property. A foreigner is not entitled to purchase immovable property in India. I assume that the buyer is also a NRI or PIO. Secondly, if the buyer is an NRI / PIO, then his purchase should also be through foreign exchange remitted into India, so that later when he desires to sell the property he may repatriate the sale proceeds up to foreign exchange remitted into India for acquisition of property. However, RBI may favourably consider the case for granting approval, if you are going to accept sale proceeds in UK itself, although the implication of such a transaction is that the buyer may not be eligible for repatriation of sale proceeds later.

  3. The prospective buyer of the land is based in India, and is willing to pay most of the sale value to me in pounds in the UK. He will not be selling it; so he will not require to repatriate its value later. Is it OK if I were to accept say 90 per cent of the sale value here in pounds and the remaining 10 percent in rupees in India? I still have bank account in an Indian bank in Delhi. I will not need to repatriate the 10 per cent in foreign exchange, and will be happy to keep it in India. Can the 10 percent be shown as the sale value, without bringing the 90 percent payment in foreign exchange in the picture? Will it be a violation of any rules if this were done?

    You need RBI permission for sale of property, which was acquired only in Rupees and not in foreign exchange as per regulations. You shall disclose the full value of sale proceeds, as any suppression will be a violation of law.

I have a plot in Faridabad, which is in the name of my father. My father is retired and does not have any income. I am working here in Netherlands can I get a loan from Citibank to build a house on the plot owned by my father.

Yes. You can get loan from any bank in India for building a house on the plot owned by your father.

I have been staying and working in Singapore for the last 10 years and just took up citizenship of Singapore. I have a Indian PIO card now. Can I invest in property in India?

Yes, PIOs can invest in property in India other than agricultural / plantation / farm house.

I am a non-resident Indian and became a citizen of Canada. I would like to know about maximum value of real estate property I can own in India?

There is no ceiling limit (or 'value') to buy real estate property. You are Person of Indian Origin (POI). POIs are permitted to acquire any immovable property, other than agricultural land / farm house / plantation property in India by purchase from out of (i) funds received in India y way of inward remittance from any plance outside India or (ii) funds held in any non-resident account maintained in accordance with foreign exchange regulations.

I have sold my ancestral property in India and wish to transfer the proceeds to the US. Please let me know if there is a maximum amount that can be transferred and what the procedure for transfer would be, including all the necessary forms that would need to be completed.

The recent circulars allow upto US $ one million from sale proceeds of inherited assets. You may approach the bankers, with proof of inheritance of ancestral property who will allow remittances after ensuring tax compliance.

I am interested in investing in commercial/residential property in India. Please advise how I can transfer my funds for investment and also how can I get loan for investment purpose. I am Canadian citizen of Indian Origin (Born in India)

Transfer of funds could be either by inward remittance into India through normal banking channels or by debit to funds held in non-resident account opened and maintained in accordance with the Foreign exchange regulations in India. As for loan for such investment is concerned, you may have to contact banker for availability, terms and conditions etc.

My mother died in Madras recently, leaving behind some immovable property which was sold and my share of Rs 12,00,000 in it is with my sister in her bank account.I am an Indian by origin but am now a citizen of UK.I need to get those Rupees converted into UK pound sterling. Could you please tell me what is the procedure for doing it?

Please furnish your bankers documentary proof to establish that the assets have been acquired through inheritance, that is your family share from your mother's property. They may also insist on tax-clearance or No objection Certificate for tax purposes for the remittance. In terms of Circular 19 of September 12, 2002, bankers are permitted to remit Person of Indian Origin, an amount not exceeding US $ 100,000 per calendar year.

I am a NRI since 1998 but have Indian Citizenship. I want to buy a land in a newly Developed residential area in India for purposer of constructing a house.

  1. Is there any legal restrictions on me to do so?

    NRIs are given general permission to purchase any immovable property, other than agricultural / plantation / farm house. So, there are no legal restrictions for buying property for residential purposes. You may have to acquire the property through foreign exchange remitted into India through normal banking channels or funds from NRE account, if any, in India.

  2. If I sell the house 10-15 years from now, would I be able to bring the money to US in American dollars?

    Yes. As per present dispensation, NRIs can repatriate the sale proceeds of immovable property acquired by them.

I am buying a residential property in India. Can I transfer funds from my Citibank Rupee checking account to my Central Bank account (general savings account-Non repatriable) and pay from that account? What are pros and cons of doing this? Will I still be able to establish a FOREX purchase by using Citibank or Central Bank account statement? Will it be needed in future?

If you desire later to sell the property and repatriate the proceeds, you should purchase the property by inward remittance of foreign exchange through normal banking channel or by debit to NRE / FCNR account. As stated, if you use rupee account, you may not be eligible for repatriation later on. Therefore, if you are particular to repatriate sale proceeds later, do not use the rupee account, but, send the purchase consideration through normal banking channel taking your banker help for remittance.

I am a PIO. Are there any restriction on number of properties I can buy/own in India through my NRE/NRO account?

There is no restriction on number of properties you can buy / own in India. However, only for repatriation of sale proceeds, it should be restricted to two such properties.

Can I buy a property with someone in India if I am an NRI - US Citizen and a joint property owner is a family member and is Indian Citizen? If yes, what kind of Bank Account I (we?) open. Since the person is of trust, can I just wire the money in his/her account?

Yes. You can buy a property (other than Agricultural / plantation / farm house) together with a Resident. The purchase consideration shall be remitted in convertible foreign exchange. You may contact your bankers for further procedures.

We are non-resident Indians living in Chicago, USA. About 8 years ago we purchased a residential flat in Pune (all payments were sent via State Bank Rupee Drafts drawn in our relative's name, who made all payments to the builder (using power of attorney). Now we are going to sell that flat. How do we bring the sale proceeds back to USA in dollars? (if not the entire amount, at least the amount that we sent from USA). What Reserve Bank rules apply to our case? What about income tax on the capital gains on this transaction? Are there any specific instructions /types of account in India in which we should deposit the sale proceeds in the interim? If all this information is available on any website, please let me know the site address(es), too.

The sale of the flat in Pune will be liable to capital gains tax at 20% if it is long term gain. The net proceeds have to be kept in NRE Account and with the permission of RBI it can be repatriated. The key point is that whether the money remitted for acquisition for property in India was out of free foreign exchange remitted into India. Rupee drafts could be made by your bankers, after the money were remitted in foreign exchange to the bankers. So, get it confirmed from bankers that money was remitted in foreign exchange. If so, to the extent remitted in free foreign exchange, you are free to repatriate sale proceeds to USA. Once repatriation is allowed on sale of property, it does not matter whether you first deposit the money in any of your accounts or send them as and when received. If you so desire, you may deposit the same in NRO account with your bankers. RBI Webster may answer these queries. You may check www.rbi.org.in

Are foreign citizens of Indian origin, holding PIO cards, eligible for availing housing loans from banks/institutions for purchasing residential property in India?

Yes, the bankers in India are permitted by RBI to grant loans to PIOs for acquisition of residential property in India, subject to certain conditions. You may contact your bankers for the terms and conditions subject to which such loans would be granted to you.

My wife and I wish to purchase a property for my parents in law in India. We are citizens of Australia but born in India. We have opened a NRE Citibank account for the purpose of transferring the funds. My parents in law have applied for PR to Australia and may think of moving here after 5-10 years. They will be using the funds we send to purchase the property.

  1. Is it better to put property also in our names or should it be in joint names for capital gains taxation purposes in India. What is the level of cap gains tax payable?

    If you seek to buy just in the name of the parents you continue to be liable for capital gains tax. Only if the money is gifted and the property is purchased by the parents would the tax arise in their hands on sale. While there is no tax implication in India for the recipient of gift, being parents, you need to check the position in Australia. It may not make a difference if the property is in your name.

  2. Worst case scenario is if we inherit the property, are the full sale proceeds repatriable. Is there capital gains tax on this?

    The repatriation of the sale proceeds would be possible. However this would depend on the exchange control regime at that point in time. Tax would be on the capital gains portion

1. I am an NRI. I purchased an acre of agricultural land (that can be converted for industrial purpose in the near future) at Bangalore Ramanagaram out of my NRE account. The registration procedure is completed at the sub registrar's office. I am waiting for the Khata in my name. I want to purchase another half acre industrial converted land attached to it. For this purpose, I have applied for NOC.

Will there be any problem in purchasing such industrial converted half acre land. I also want to know about the already purchased agricultural land out of NRE account. At the time of registration no one including subregistrar objected to this. So all the above is legally carried out. Please advise me.

Answer: Agricultural land cannot be bought by NRIs. Non-agricultural land can be purchased.

2. I purchased a property from DLF in 1997 & it was registered for Rs 30 lacs only in the Gurgaon Subregistrar's office. You may note that my actual purchase price issued through NRI cheques was Rs 60 lacs as I paid a big premium to buy the allotment from the original allottee of the apartment & have my name added in DLF records. Today I wish to sell the apartment. For calculation of capital gains tax will the Income Tax authorities take Rs 30 lacs as my purchase price (ie registered amount) or Rs 60 lacs which was my actual purchase price for which cheque payments have been made?

Answer: What is available in the records as the purchase price will be taken as the cost of purchase. If the premium as paid as per records then it can be part of the cost.

3. I am U.S. Citizen. My father who is Indian citizen but has been living in US for 30 years owns agriculture land in India. Will I be allowed to inherit his land? Also India allows dual citizenship and how does affect my inheritance rights?

Answer: Inheritance is allowed. Dual citizenship doesn't affect this.

4. I am living in Delhi. My father has two sons and two daughters. My brother died in 1994 and his wife and her daughter are now in New Jersey, USA. My younger sister died in 2002 and she had two daughters (both are minors still). My father left an immovable property at Chennai, which has one plus one. I would like to retain at least 50% of the property with me and I want to sell the remaining. Out of the proceeds of that, I would like to distribute it to all the other legal heirs, to which everyone agreed.
The questions are:
1) Can my brother's wife and her daughter give PoA? If so, in what form? Other formalities, if any.
2) How can I send her portion of money to USA?

Answer: 1. Your brother's wife and daughter can give a power of attorney to you. You may consult a lawyer for the wordings in the POA.

2. Repatriation is permitted subject to restrictions and conditions by RBI.

5. We have a real estate company in India and the owners are 3 parties all of Indian Origin and 2 of them are currently US citizens. We bought a commercial property in India under an Indian company formed by us. We wired the money from the US in the account to acquire the property. Now we are planning to sell the property. Can we wire our investment back in US dollars back into our US account?

Answer: The transaction narrated by you is possible if you are individuals. Now that your investment in Real Estate is in a company, it is only the same will be subject to FDI regulations. Also the sale proceeds of property will only come to the Company and not to individuals, therefore you can only repatriate the sale proceeds of Shares of such company.

6. I have a property in Hyderabad, AP, India. The sale agreement for the same has been drawn in Naperville, IL, USA. The purchase was made by my father with income acquired overseas. It was given as a gift to my mother under whose name it presently is. The property was purchased in 1984. The repatriation will also be under my mother's name. What is the best way for repatriation of the funds acquired from the sale of that property to the US? Also, please let me know what the regulations and the procedures are.

Answer: I am assuming your mother is a non-resident, meaning she is presently residing at US. If so, give proof of the legacy of property (gift by your father, who acquired in foreign exchange) to your bankers in India and remit the Sale proceeds in NRO account. From thereon, your banker will let you know the documentation needed for repatriation of sale proceeds, net of taxes.

7. For purpose of computation of capital gains tax is the stamp duty paid by me on property purchase included in determining total cost of purchase? In other words can I include the stamp duty paid by me to register the property in the total cost of property acquisition? Also my property developer from whom I had purchased the apartment did not provide any woodwork at all & I had to get wardrobes, kitchen cabinets etc made. Can this cost also be included by me in computing total acquisition cost of property?

Answer: Stamp duty can be included in the cost of purchase but not woodwork etc unless they had originally been part of the cost of purchase.

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