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PURCHASE OF PROPERTY AND INVESTMENT IN INDIA BY NRIs
NON -RESIDENT INDIANS
A Non-Resident Indian (NRI) is a citizen of India who holds an Indian passport and has temporarily immigrated to another country for six months or more for work, residence or any other purpose. The rates of income tax are different for persons who are resident in India and for NRIs.
A person resident in India means that the person is staying in India for at least 182 days in a calendar year or 365 days in four consecutive years. Any Indian citizen who does not meet the criteria as a resident of India is a Non-Resident of India and is treated as Non Resident Indian (NRI). Every individual must file a tax return if their income exceeds Rs. 2,50,000/- per annum. But Non Resident Indians are only taxed for income earned/collected in India.
PURCHASE AND TRANSFER OF IMMOVABLE PROPERTY IN INDIA BY NON RESIDENT INDIAN:
An NRI can acquire the Immovable property in India by following modes:
(a) By way of Purchase;
(b) By way of Gift from a relative;
Provided that agricultural land/plantation property/farm house are exception which cannot be acquired by an NRI by way of purchase or gift. To acquire agricultural land/plantation property/farm house in India, an NRI has to get prior approval from the RBI. NRI can sell the immovable property acquired to any Indian resident, NRI or to an OCI card holder.
(c) By way of Inheritance from Indian resident.
Provided that agricultural land/plantation property/farm house acquired through inheritance can only be sold to the Indian residents exclusively.
However, it is pertinent to mention that an NRI can continue to hold immovable property or any investment in India which he has acquired or invested in when he was resident in India.
NRIs can make the purchase using Indian currency, the Rupee, through funds received in the country by means of normal banking channels. These funds have to be maintained in a non-resident account under the foreign Exchange management Act (FEMA) and the Reserve Bank of India (RBI) regulations.
Any investments by NRI in movable assets like bank accounts, Fixed deposits, post savings etc. has to be transferred to NRO/NRE account by informing the manager within three months of becoming NRI.
Foreign nationals of non Indian origin resident outside India are not permitted to acquire any immovable property in India unless such property is acquired by way of inheritance from a person who was resident in India. Foreign Nationals of non Indian origin who have acquired immovable property in India by way of inheritance with the specific approval of RBI can not transfer such property without prior permission of RBI.
PAYMENT FOR ACQUISITION FOR IMMOVABLE PROPERTY
The Payment for immovable property has to be made in India through banking channels which is subject to payment of all taxes and other duties/ levies in India. The payment can also be made out of funds held in NRE/ FCNR (B)/ NRO accounts of the NRIs/ OCIs. Payments should not be made through travellers’ cheque and foreign currency notes.
Where can NRI invest in India?
NRIs can invest in mutual funds in India and no approval is required from Reserve Bank of India.
NRI can invest in Indian stock markets under the portfolio investment scheme (PIS) of the Reserve Bank of India (RBI). Under this scheme, an NRI has to open an NRE/NRO account with an RBI-authorised Indian bank. An NRI cannot transact in India without stock broker.
NRIs can also invest in company deposits provided the principal and interest amount would not be credited to a Non Resident External (NRE) account. The amount that are received from the deposits are non-repatriable, that means you cannot transfer the money back abroad.
Where NRI Cannot Invest in India?
NRIs are not allowed to invest in post office savings schemes. They cannot invest in instruments like the National Savings Certificates, Public Provident Fund, Monthly Income Schemes and other time deposits offered by the post office.
If a person is a Non-Resident Indian, he/she can open two kinds of account in India: Non-Resident External account (NRE), and Non Resident Ordinary Account (NRO).
An NRE account is a bank account opened in India in the name of an NRI, to park his foreign earnings; whereas, an NRO account is a bank account opened in India in the name of a NRI, to manage the income earned by him in India.
Why NRO Account is required:
When a person becomes a Non Resident Indian, he is required to either close his existing savings account, or convert it to a Non-Resident Ordinary Account.
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