General FAQs

Q. Who is an NRI as per FEMA?

Ans: A citizen of India who stays abroad for employment or is carrying on business or vocation outside India or stays abroad for a period over 182 days is an NRI.

Q. Who is a PIO (Person of Indian Origin)?

Ans: Under the provisions of Foreign Exchange Management Act a person of Indian origin is an individual (other than a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan) who at any time held an Indian passport, or he or his father or his grandfather was a citizen of India by virtue of the Constitution of India or Citizenship Act, 1955 (57 of 1955).

Q. Who is an OCI (Overseas Citizen of India)?

Ans: (a) Any Adult person (i) Who is a citizen of another country, but was a citizen of India at the time of, or at any time after, the commencement of the constitution, or
(ii) Who is a citizen of another country, but was eligible to become a citizen of India at the time of the commencement of the constitution, or
(iii) Who is a citizen of another country, but belongs to a territory that became part of India after the 15th Day of August, 1947.
(iv) Who is a child of such a citizen

Q. Do PIOs and NRIs need permission from the RBI (Reserve Bank of India) to purchase residential or commercial property within India?

Ans: No, PIOs and NRIs do not need any permission from the RBI to purchase residential or commercial property in India (except for the purchase of agricultural land/ plantation property/ farm house).

Q. Can sale proceeds of the residential or commercial premises be remitted out of India?

Ans: Sale proceeds of the real estate property other than the farmhouse / agricultural land / plantation property may be remitted out of India through fulfillment of definite conditions.

Q. Can the NRIs get loans to purchase residential premises from accredited dealers or financial institutional offering housing finance?

Ans: Yes. The NRIs may obtain loans. Nevertheless, repayment of the loan must be made within the period not surpassing 15 years by inward remittances or from funds held in borrower's NRO/NRE/FCNR accounts.

Q. Can PIOs and NRIs gift the residential or commercial premises to the / registered charitable trusts / relatives /organizations in India?

Ans: Yes. The general permission is given by the RBI to the PIOs and NRIs to transfer through the way of gift, real estate property, held with them in India to relatives or charitable trusts or organizations, subject to certain conditions and compliance of applicable laws.

Q. How should the PIOs and NRIs make payment for the residential or commercial property?

Ans: Payment can be made either by inward remittances in the foreign exchange, using the normal banking channels or out of funds through NRO/NRE/FCNR accounts of any Indian banks.

Q. Are any conditions needed to be fulfilled, in case the repatriation of the sale proceeds is desired?

Ans: Applications for repatriation can be made provided the sale takes place after three years from the date of final purchase deed or from the date of payment of final installment amount, whichever is later.

Q. What is the procedure for repatriation?

Ans: Applications for remittance of sale proceeds should be made in form IPI 8 to the Central Office of RBI. Mumbai within 90 days of the sale of the property.

Q. What are the documents needed for buying property in India?

Ans: Here is the list of documents needed for buying property in India.

• Address proof
• OCI/PIO card (for OCI/PIO)
• PAN card (Permanent Account Number)
• Passport (for NRI)
• Passport size photographs

Q. What is Tax treatment for the income generated from the property selling/renting for the NRI/PIO/OCI?

Ans: Any income accruing from the ownership of property in the form of rent, annual value of the house and/or capital gains arising on the sale of this property is taxable in the hands of the owner.

Q. Do NRI/PIO/OCI have to file return within India for the property rental income as well as Capital Gains Tax?

Ans: Rental income earned is taxable in India, and they will have to obtain a PAN and file return of income if they have rented this property. On sale of the property, the profit on sale shall be subject to Capital Gain Tax (Long term or short term depending upon the duration of the property held before selling)

Q. How does DTAA (Double Taxation Avoidance Agreement) work in context of the tax on the income as well as Capital Gains tax-paid within India by the NRI?

Ans: India has DTAA's with several countries. However, in case of sale of immovable property, the DTAA with most countries provide that the capital gains will be taxed in the country where the immovable property is situated. Hence, the non-resident will be subject to tax in India on the capital gains which arise on the sale of immovable property in India. Letting of immovable property in India would be taxed in India under most tax treaties in view of the fact that the property is situated in India.

Q. How does the Double Taxation Avoidance Agreement work for the CGT paid within India on foreign tax treatment?

Ans: In case the non-resident pays any tax on capital gains arising in India, he would normally be able to obtain a tax credit in respect of the taxes paid in India in the home country, because the income in India would also be included in the country of tax residence. The amount of the tax credit that can be claimed are specified in the respective country's DTAA and is also dependent on the laws of the home country where the tax payer is a tax resident.

 

Banking FAQs

Q. Which bank account is a better option for NRIs, NRE or NRO or FCNR account?

Ans:
A. Non Resident External Account (NRE)

An NRE account is a Rupee denominated account. That is, funds in an NRE account are maintained in Indian Rupees. It can be a savings, current or a fixed / term deposit account.

Advantages of NRE Accounts

• The interest earned on deposits in an NRE account is exempt from tax in the hands of the NRI.
• Funds can be repatriated from an NRE account. This means that the funds can be freely sent to any other country.
• An NRE account can contain funds remitted from abroad, or obtained from another NRE / FCNR account maintained in India.
• Funds can be transferred from an NRE account to an NRO account without any restriction.
• An NRE account can be held jointly, provided the other person is also an NRI.
• Nomination is allowed for NRE accounts.

Disadvantages of NRE Accounts

• Interest earned on Deposits in an NRE account is very less comparatively to NRO account.
• Balances in the NRE accounts are held in Indian Rupees and thus exposed to Exchange Fluctuation risk.

Tip: NRE Account are best suitable for people who needs to make payments in INR or want to make investments in India from his/her overseas earnings and at the same time you want your Rupee savings to be freely Repatriable.

B. Non Resident Ordinary Accounts (NRO)
NRO accounts are also rupee denominated account. This means that the foreign currency is converted to Indian rupees at the prevailing foreign exchange rates when the money is deposited into the account.

Advantages of NRO Accounts

• Interest earned on Deposits in NRO account is very high comparatively to NRE account.
• An NRO account can be held jointly with another NRI or with a resident Indian.
• Nomination is allowed for NRO accounts.

Disadvantages of NRO Accounts

• Funds cannot be repatriated from an NRO account. These funds have to be used only for local (within India) payments in Indian Rupees.
• An NRO account can only contain funds received from within India.
• Funds cannot be transferred from an NRO account to an NRE account.
• The interest earned on deposits in an NRO account is taxable in the hands of the NRI as per the applicable income tax slab rates.

Tip: NRO Accounts are best suitable for people who want to deposit his income in India from sources such as rent, dividends etc., and you want your investments in India to fetch higher returns.

C. Foreign Currency Non Resident Account (FCNR)
FCNR accounts are denominated in foreign currency. The source of funds deposited into FCNR accounts have to be from sources abroad. They can also be from your other NRE or FCNR accounts.

Advantages of FCNR Accounts

• The principal amount and the interest are fully repatriable.
• Interest income earned on the money in a FCNR account is non-taxable in India. However, it may be taxable in your country of residence as per that country's tax rules.
• You can have other NRIs as joint account holders on FCNR accounts.
• FCNR accounts do not carry any forex rate risk as the accounts are always maintained in the foreign currency.

Disadvantages of FCNR Accounts

• Interest Rate on deposits in FCNR accounts are less comparatively to NRO accounts.
• Resident Indians cannot be joint account holders in FCNR accounts with NRIs.
• Savings account option is not available for FCNR accounts.

Tip: FCNR Accounts are best suitable for people who wish to keep his overseas savings in India but do not want to convert them in INR.

 

Disclaimer: These are the broad guidelines meant for ready reference with respect to acquisition and transfer of immovable property in India by NRI/PIO/OCI and in each case prospective buyer or seller of property in India must consult his/her own legal/finance/tax advisor and obtain suitable advise for their specific transaction. Ace Riverside Pvt. Ltd. assumes no responsibility or legal liability for transactions entered into by placing reliance on these FAQs. These guidelines are as applicable as on 31st January 2011 and are subject to amendment by the regulatory authority. Ace Riverside Pvt. Ltd. assumes no responsibility for updating these FAQs.