nri property ownership

Legalities of NRI property ownership

Legalities Of property owned by Non-NRI defined as the Property buys in India by NRI complying Legal Compliances. As there is a Prescribed Procedure to acquire the property if Purchased in India sticking to Legal Procedure that NRI has to follow. There might be some Stringent formalities under the law that  NRI has to follow for purchasing the property in India. Moreover, it is encouraged to Make the NRI to Spend their Handsome amount in the Indian property. There are certain Guidelines that RBI has prescribed for making the purchase of Real Estate by complying with the Special Permissions.

 NRI property ownership

Let’s have a quick glance at this:-

Nature Of the Properties under Real Estate-

The real estate consists of two types of Properties that are, residential or commercial property in India. And Consequently, whatever nature of property NRI wants to purchase can Invest in India without seeking permission except for Certain Property in India. As RBI has provided general permission to buy any property and any type of property wherever want to buy in India. However, there is a requirement of Certain Special Permission for a certain kind of prescribed property namely, any agricultural land or plantation property in India and a Farm House as well. It means that NRI has to take permission to buy the property which is equipped with RBI’s Special Permission. But NRI doesn’t make any communication regarding those properties which are in General permission of RBI.

Ownership-

Ownership of the Property in India can be of any nature that may be either as a single owner or jointly, with any other NRI. Now it is on the Discretion of the NRI how he wants his ownership to the Property. However, If the NRI wants to purchase the property with the Indian resident who is not allowed to make the investment in India due to certain restrictions irrespective of the part of the amount invested by Indian Resident.

Continuity of the Ownership-

It means that if the person’s status is Resident while he purchased the property and later he become NRI then there is no worry for further. As Ownership will continue in respect of the following property that is otherwise not allowed to buy in India by the NRI:-

  • agricultural land
  • plantation property,
  • farmhouse

Actually these are those properties that are otherwise not allowed to NRI to make the investment in India. So this is a perfect way of Owning property of these kinds. Moreover, Even the Indian Resident on becoming NRI can also let out it and also can sell whenever he wants subject to Indian Taxes on the Rent ( when on rent ) and (when sold the property).

Source of Fund for Buy property in India

When the NRI wants to buy property in India then question come then Source of Fund that is the following:-

  • Through Normal Banking Channel of India
  • In NRE/ FCNR (B) / NRO account held in India

Note:-  Traveller’s cheque or by foreign currency notes are not allowed to make the purchase for the property and No payment can be made out of India.

NRI Taxation- NRI can make Investment in India in Real estate equipped with the Income Taxation compliance

Let’s have a quick discussion on taxation perspective:-

NRI Tax Compliance

Rental Income under Income Tax-

If NRI wants to make purchase Property in India and want to Rent out in India itself then the Rent accrued or Earned in India will be subject to Taxed. NRI can’t avoid the income Taxes On the Property in India rent out.

Capital Gain Income-

A capital gain may be of two types, depending upon the Holding period how long it holds. If it is Short term capital gain then it will be taxable at Tax slab rates of Income Tax whichever is applicable to the NRI. This Tax is when the NRI sells property in India then he will be subject to the above-mentioned taxes.

Property Inheritance-

Here, Nri is allowed to inherit any type of property in India either it is of Residential or Commercial Property. Even he can buy agriculture land or Farmhouse which he is otherwise restricted to make an investment as this falls in special Permission from RBI.

The next thing is that NRI can Inherit the property either he is resident or NRI. So, the only exception is that NRI can’t inherit property from the Foreign Citizen who is residing outside India. Accordingly, all these points should be kept in mind while NRI purchasing the property in India.

Gifted Property Consequences-

If the NRI wants to gift to either Indian Resident or another NRI then he is permitted to do so. But if it is property is of nature in agricultural land, plantation property or a farmhouse then it can be only gifted to Indian Resident. If the Property is gifted to the Relative (As per Relative defined under the Income Tax Act ) then it will be exempt under the Income Tax Act.

Foreign Company ( overseas company or a subsidiary company) can invest in Indian property?

The answer is Yes as the Foreign company is permitted to make the investment in the Indian Real estate sector with 100% FDI as per Government FDI policy. However it is important to understand that Invest by Foreign company can be made in the construction development segment, not under the Finished property.

Legally Compliant Property-

While purchasing a property in India, it is important to NRI to make a proper decision whether the property they are about to acquire is compliant with all legal aspects therein. Expert Advice and Relevant State RERA act should be considered while making a property purchase. It is just to know whether the Property is fully RERA compliant or not. So these considerations must be seen to verify the legal aspect of the Property. If the Legal factor is not taken into consideration then it will be recognized as the Illegally acquired property.

Disputes Under the Property-

If the NRI finds Conflict with his Property acquired in India then that can be resolved in India not anywhere else in India. Moreover, if the Property is Rera Compliant then it can be resolved in the respective RERA state. Conflicts and Disputes can be resolved In Indian Jurisdictional Courts.

This is all about the Property investment in India by the NRI. It will be prudent for the NRI to pay attention before thinking to make the investment in Indian Property. As we discussed the investment either in the nature of the Commercial or Residential property, there is Indian law will be applicable with respect to the acquisition and transfer of the property in India. Moreover Gifting of the Property can be made either to NRI’s or Indians along with the gifting to Relative as per the Income-tax act. Inheritance is also made via WILL either to the Indian Resident or the another  NRI

Indian Taxation has made Property investment lenient in terms of its acquisition and Transfer of it.

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