If you’re a Non-Resident Indian (NRI) or a Person of Indian Origin (PIO) dealing with property transactions in India, it’s crucial to be well-versed in the guidelines laid out by the Reserve Bank of India (RBI) under the Foreign Exchange Management Act, 1999 (FEMA). In this blog post, we’ll simplify the key provisions and answers to common questions regarding property ownership, rental, and transactions.
Property Rental by NRI/PIO:
Question 1: Can NRI/PIO rent out the residential or commercial property purchased with foreign exchange or rupee funds?
Answer: Yes, NRI/PIO can rent out the property without requiring approval from the Reserve Bank. The rent received can be credited to NRO, NRE accounts, or remitted abroad. Authorized Dealers are empowered to allow repatriation of current income, including rent, based on certification by a Chartered Accountant.
Holding Property as an NRI/PIO:
Question 2: Can a person who bought immovable property when a resident continue to hold such property after becoming an NRI/PIO?
Answer: Yes, individuals can continue to hold residential, commercial, agricultural, plantation, or farmhouse properties in India without the need for Reserve Bank approval.
Sale of Immovable Property:
Question 3: In which accounts can the sale proceeds of such immovable property be credited?
Answer: The sale proceeds can be credited to the NRO account.
Question 4: Can the sale proceeds of the immovable property be remitted abroad?
Answer: Yes, subject to a limit of USD one million per financial year, for all bona fide purposes, and satisfying Authorized Dealers’ conditions, including tax compliance.
Foreign Nationals Holding Property in India:
Question 5: Can foreign nationals of non-Indian origin, resident in India or outside India, transfer immovable property acquired under FERA?
Answer: Yes, they can continue to hold the property, but transfer requires prior approval from the Reserve Bank.
Regulations for Residents in India:
Question 6: Is a resident in India governed by the provisions of Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000?
Answer: Yes, residents in India who are citizens of specific countries need prior approval from the Reserve Bank for property acquisition and transfer, even if they are residents in India.
Definitions Under FEMA, 1999:
Question 7: Where are the terms ‘person resident in India’ and ‘person resident outside India’ defined?
Answer: Section 2(v) and Section 2(w) of FEMA, 1999 define ‘person resident in India’ and ‘person resident outside India,’ respectively.
Question 8: What is meant by a person resident in India?
Answer: A person residing in India for more than 182 days during the preceding financial year, indicating an intention to stay for an uncertain period.
Question 9: What is meant by a person resident outside India?
Answer: A person not resident in India.
Residential Status Determination:
Question 10: Who can determine whether a person is resident in India or not?
Answer: The Reserve Bank does not determine residential status; it is determined by FEMA law, and the individual must prove their status if questioned.
Foreign Nationals Purchasing Property in India:
Question 11: If a foreign national is a person resident in India as per FEMA, 1999, does he require approval from the Reserve Bank to purchase any immovable property in India?
Answer: A foreign national residing in India does not need approval from the Reserve Bank concerning FEMA regulations. However, any necessary approvals, as stipulated by other authorities, such as the respective State Government, must be obtained by the individual. It’s important to note that a foreign national residing in India, who is a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, and Bhutan, does require specific prior approval from the Reserve Bank.
Understanding these guidelines is essential for smooth property transactions, ensuring compliance with FEMA regulations. Always consult with legal and financial experts for personalized advice based on your specific circumstances.
