A person is labelled a Non-Resident Indian (NRI) if he/she is an Indian citizen but stays abroad for employment purpose or under circumstances indicating an intention for uncertain duration.
PIO or Person of Indian Origin is one who held Indian Passport at any time or whose father or grandfather was a citizen of India as per the Constitution of India or the Citizenship Act, 1955.
OCI or Overseas Citizen of India is:
– One who was Indian citizen at the time of, or at any time after, the commencement of Constitution.
– One who was eligible to become a citizen of India at the time of the commencement of the Constitution.
– One who belongs to a territory that became part of India after 15th August, 1947.
– Government considers investment by NRIs/OCI/PIO at par with that of residents.
– There is no differential pricing for projects sold to Indians or to NRIs. Also, few developers are launching NRI-centric projects.
– With increasing demand for office space by MNCs and start-up another higher return avenue is available for investment.
– Depreciating rupee has given a golden opportunity to investors abroad. Also, several new policies and reforms have brought Indian economy on track. Thus, overseas investors can expect good returns on investment.
– Consistent rental income.
– Lastly, emotional quotient has prompted many Indians overseas or ones with their roots in the country to invest here in hope to return to the country or in favour of their relatives.
– Amount remitted to India through normal banking channels, or
– Funds held in NRE / FCNR (B) / NRO account maintained in India – these are three kinds of accounts that an NRI can hold with banks in India.
NRE or Non-Resident External Rupee account can be opened by the NRI himself and not through the holder of POA. It can be in the form of Savings, current or recurring or FD account with maturity of minimum one year.
FCNR or Foreign Currency Non-Resident (Bank) account provides nomination facility in which the nominee can be a resident of India.
NRO or Non-Resident Ordinary Rupee account can be opened by anybody who is resident outside India for carrying out transactions in rupees. It can be opened in the form of current, savings or recurring or FD account.
(Note: Payments via traveler’s cheque or by foreign currency notes or by other mode is not permitted in property purchase.)
2) PIO Card
– If you hold passport of any foreign country.
– If you are a foreign citizen whose father or grandfather was a citizen of India.
3) OCI Card
– It is required if you are not a citizen of India, but eligible to become an Indian citizen before or after partition.
(Note: You can apply for these cards in the Indian embassy or consulate in the country of your residence by producing your parents birth certificate as proof that you are an OCI or PIO.)
4) PAN Card
– Permanent Account Number (PAN) is mandatory to file income tax returns in India in case the property is rented out or sold.
5) Power of Attorney (POA)
– The person given the POA can get the registration, execution of the sale, possession and other processes done on your behalf.
Address proof and passport size photographs.
Criteria pertaining to minimum age and years of work experience abroad should be met but these things vary from bank to bank.
|Bank||Minimum Age (In Years)||Minimum Years Of Work Experience (In Years)|
|State Bank of India (SBI)||18||2|
|Axis Bank||24||6 months abroad and total work experience of 2 years|
– If you are self-employed, then you should have stayed abroad for minimum 3 years.
– Professional and educational qualifications also play a major role. Those applying for loans should be at least graduates.
One should check with their bank or lending agency on compliance with the above norm.
– Loan amount and time for repayment is at par with those applicable for people residing in India.
– Loan amount shall not be credited to Non-Resident External (NRE) or to Foreign Currency Non-resident (FCNR) or to Non-resident non-repatriable (NRNR) account of the borrower.
– Interest rate on home loans is same as for regular residents.
– Borrowers can pay installments, interest and other charges by remittances from outside India through normal banking channels or out of funds in his NRE/FCNR/NRNR/NRO/non-resident special rupee (NRSR) account in India.
– Post-dated cheques can be issued or Electronic Clearance Service (ECS) from NRE, NRO or FCNR account.
– If any rented property was acquired using the home loan route, then the rent amount can also be used to repay the loan. Cheques issued from any relative’s local account can be used to make payments.
(Note: ‘Relative’ as defined in section 6 of the Companies Act, 1956. A person shall be deemed to be a relative of another if (a) they are members of a Hindu undivided family, (b) they are husband and wife; or (c) the one is related to the other in the manner indicated in Schedule IA (Father, mother, son, son’s wife, Daughter, Daughter’s husband, etc.)
Points to Remember
Inherited or jointly held property
– Check title papers carefully.
– Do a bank release if at any point of time the property was under mortgage.
– In order to make sure there are no pending dues (water, electricity, or any other), take a no dues certificate from the seller at the time of buying.
– Take NOC from builder.
– Check the Land title.
– Once RERA Act is in force in the region where you plan to purchase property, follow all disclosures made by the builder.
Tax on Rental Income
The owner is liable to pay taxes on the rental income. The tax amount is deducted at source (TDS), i.e. your tenant. Thus, your tenant must obtain a TAN number and deduct a TDS of 30 percent from the total rent amount. Post this, the TDS certificate must be given to the owner/landlord.
(Note: If the tenant fails to pay the tax amount, he will be held responsible by the tax authorities. Also, you will not be able to declare any incomes from your taxable incomes. However, if you have already paid and filed for tax returns this may not be an issue.)
– PIO/OCI Card
– Appointment letter’s copy and contract from the company employing the applicant
– The labor card/identity card (translated in English and countersigned by the consulate)
– If the person is employed in the Middle East Salary certificate (in English) specifying name, date of joining, designation and salary details
– Bank Statements for the last six months
List of Classified documents for:
– Copy of valid passport showing VISA stamps
– Copy of valid visa / work permit / equivalent document supporting the NRI status of the proposed account holder
– Overseas Bank A/C for the last 3 months showing salary credits.
– Latest contract copy evidencing Salary / Salary Certificate / Wage Slips
– Utility Bills for Address Proof
– Power of Attorney (POA) – if any
– Income Tax returns last 2 years
Self Employed Non Resident Applicants:
– Passport copy with valid visa stamp
– Brief profile of the applicant and business/ Trade license or equivalent document
– 6 months overseas bank account statement and NRE/ NRO account
– Computation of income, P&L account and B/Sheet for last 3 years certified by the C.A / CPA or any other relevant authority as the case may be (or equivalent company accounts).
– Utility Bills for Address Proof
– Power of Attorney (POA) – if any
– Income Tax returns last 3 years
– The current passport, with birthplace as ‘INDIA’
– The Indian passport, if held by the individual earlier
– Parents/grandparents Indian passport / birth certificate / marriage certificate substantiating the individuals claim as a person of Indian origin
– In case the property was bought using foreign exchange sources, then the repatriation cannot exceed the foreign exchange amount paid for purchase of property through banking channels.
– If property was acquired using rupee, one can remit an amount up to USD one million, per financial year. The NRI/PIO may use this facility to remit capital gains, where acquisition of the subject property was made by funds sourced by remittance through normal banking channels/by debit to NRE/FCNR (B) account.
– Repatriation of sale proceeds is restricted to maximum two properties.
– Capital gains, if any, may be credited to the NRO account from where the NRI’s/PIO’s may repatriate an account up to USD one million, per financial year (April to March).
– Form 15CA is enough in case the remittance limit does not exceed Rs 50,000 per month. However, in certain cases where amount exceeds this limit, a certificate from a CA in Form 15CB in mandatory before uploading Form 15CA online.
(Note: Form 15CB entail details pertaining to the payment, TDS rate and deduction as per Section 195 of the Income Tax Act. It also has details of DTAA, i.e. Double Tax Avoidance Agreement, if applicable.)
Under Section 80C, principal on home loans, stamp duty and registration charges are allowed as deductions with maximum limit of Rs 1.5 lakh per year.
Again, in this case also, capital gains may be taxable in non residents country of residence. However, under DTAA, relief may be available in the form of credit for Indian taxes paid.
Capital gains can also be invested in specific bonds for up to Rs 50 lakh issued by National Highway Authority of India (NHAI) or Rural Electrification Corporation (REC) within six months of sale.
An NRI/OCI/PIO should be well-versed with the income tax implication of their country of residence. There are countries that provide partial or complete exemption on capital gains if all the requisite conditions are met, while few other countries tax the residents no matter where they are originally from.
(Note: Non residents owning only one property in the world which happens to be in India, then you need not have to pay an income tax on the deemed rental income in India.)
POINTS TO REMEMBER!
– It is advised that you make sure you know which agreement you are opting for.
– Know about the best way to get your rent credited to your account on time.
– Know the tax implications well in advance.
Below are ten major features of the Act
– Without signing a sale agreement, developers cannot accept the advance sum of more than 10 percent of the total cost of property from the buyer.
– A developer will have to maintain a project Escrow Account where 70% of the money can only be withdrawn for purpose of project land and construction costs.
– Wrong representation of services/amenities is completely prohibited. All ads and brochures must be uploaded in the authority’s website where all the details pertaining to the projects has been entered.
– Any structural defect in the property within five years from the date of handing possession must be rectified by the developer within a month’s time without any cost.
– Specifying time period for project completion during registration is expected to bring in a huge relief for the home buyers.
– During registration, the developer must reveal the name and address of all the real estate brokers/agents associated with the project.
– Brokers/agents involved in facilitating sale or purchase of any project will also have to be mandatory obtain registration from the concerned authority. In absence of this, brokers shall not do any such activity around the project.
– If a developer fails to adhere to any of the norms mentioned in the Act, the authority can cancel the registration of a project on receiving a complaint or suo motu.
– The authority will grant/reject registration within 30 days of receiving the application of the concerned project. It must give a registration number and login ID/password for accessing the website. Post this, developers will create the webpage and fill in the requisite details pertaining to the project.
– For the projects that are being developed in phases, the developer will have to register each phase separately. As per the new Act, each phase is considered as a stand-alone real estate project.
– A developer cannot transfer the rights and liabilities of the real estate project to a third party without getting the written consent from at least two-third buyers (allottees), and the written approval by the concerned authority.
Several other customer friendly measure are part of this Act. But real estate being a state subject every state in India will be adopting a Real Estate Act applicable to projects in that state.