Under the Foreign Exchange Management Act (FEMA), a 'person resident in India' includes a person residing in India for more than 182 days during the course of the preceding financial year but does not include a person who has gone out of India or who stays outside India (for employment, business, vocation, or for any other purpose) or a person who has come to or stays in India (other than for employment, business, vocation in India, or for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period).
All other persons are non-resident Indians (NRIs).
Rules of purchase
NRIs are permitted to buy and sell property in India but acquisition and transfer of immovable property by them should be in accordance with the FEMA.
Property should be purchased through a registered conveyance deed but can also be purchased on Power of Attorney. In the latter case, an agreement to sell and a power of attorney are executed by the seller in favour of the buyer. However, the same is not formally registered with the office of Registrar and as such no stamp duty is to be paid for the purchase.
NRIs do not require permission of the Reserve Bank of India (RBI) to acquire residential/commercial property in India, as RBI has granted general permission to foreign citizens of Indian origin, whether resident in India or abroad, to purchase immovable property in India for their bonafide residential purpose.
However, the purchase consideration should be met either out of inward remittances in foreign exchange through normal banking channels or out of funds from NRE/FCNR accounts maintained with banks in India. Foreign citizens of Indian origin, purchasing residential immovable property in India under the general permission, are required to file a declaration in form IPI 7 with the Central Office of RBI at Mumbai within a period of 90 days from the date of purchase of property or final payment of purchase consideration along with a certified copy of the document evidencing the transaction and bank certificate regarding the consideration paid.
Sale of property
RBI has granted general permission for sale of such property. However, where another foreign citizen of Indian origin purchases the property, funds towards the purchase consideration should either be remitted to India or paid out of balances in NRE/FCNR accounts.
In respect of residential properties purchased on or after May 26, 1993, RBI considers applications for repatriation of sale proceeds up to the consideration amount remitted in foreign exchange for the acquisition of the property for two such properties.
The balance amount of sale proceeds if any, or sale proceeds in respect of properties purchased prior to May 26, 1993, will have to be credited to the ordinary non resident rupee account of the owner of the property. Applications for repatriation of sale proceeds are considered provided the sale takes place after three years from the date of final purchase deed or from the date of payment of final instalment of consideration amount, whichever is later.
Applications for necessary permission for remittance of sale proceeds should be made in form IPI 8 to the Central Office of RBI at Mumbai within 90 days of the sale of the property. RBI has also granted general permission to foreign citizens of Indian origin to acquire or dispose of properties up to two houses by way of gift from or to a relative who may be an Indian citizen or a person of Indian origin whether resident in India or not, subject to compliance with applicable tax laws.
Moreover, RBI also permits non-resident persons (foreign citizens) of Indian origin to transfer by way of gift immovable property held by them in India to relatives and charitable trusts/organisations subject to the condition that the provisions of any other law, including Foreign Contribution (Regulation) Act, 1976 are complied with.
In addition to the above, properties other than agricultural land/farm house/plantation property can be acquired by foreign citizens of Indian origin provided the purchase consideration is met either out of inward remittances in foreign exchange through normal banking channels or out of funds from the purchasers' NRE/FCNR accounts maintained with banks in India and a declaration is submitted to the Central Office of RBI in form IPI 7 within a period of 90 days from the date of purchase of the property/final payment of purchase consideration. They can also dispose of such properties.
Renting out property
RBI has granted general permission for letting out any immovable property in India. The rental income or proceeds of any investment of such income are eligible for repatriation.