For NRI and POI
The definition of ‘Person of Indian Origin’ is defined under section 2 (b) of Foreign Exchange Management (borrowing and lending in rupees) Regulations, 2000 and under section 2 (xii) of Foreign Exchange Management (Deposit) Regulations, 2000 as given under:-
Person of Indian Origin’ means a citizen of any country other than Bangladesh or Pakistan, if
He at any time held an Indian passport; or
He or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955); or
The person is a spouse of an Indian citizen or a person referred to in sub-clause (a) or (b)”
Person of Indian Origin (PIO) for the purpose of acquiring immovable property in India as given under:- “Person of Indian origin’ means an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan), who
At any time, held an Indian passport; or
Who or either of whose father or mother or whose grandfather or grandmother was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955)
NRIs/OCB’s are granted the following facilities:
Maintenance of bank accounts in India
Investments in securities/shares of, and deposits with, Indian firms/companies
Investments in immovable properties in India
Under the general permission available, the following categories can freely purchase immovable property in India:
Non-Resident Indian (NRI) – that is a citizen of India resident outside India
Person of Indian Origin (PIO) – that is an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan), who
At any time, held Indian passport, or
Who or either of whose father or grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).The general permission, however, covers only purchase of residential and commercial property.
Yes, under the general permission granted by the Reserve Bank, property other than agricultural land/farm house/plantation property can be acquired by NRIs provided the purchase consideration is met either out of inward remittances in foreign exchange through normal banking channels or out of funds from the purchaser’s NRE/FCNR accounts maintained with banks in India and a declaration is submitted to the Central Office of Reserve Bank in form IPI 7 within a period of 90 days from the date of purchase of the property/final payment of purchase consideration.
The Reserve Bank has granted some general permission to certain financial institutions providing housing finance e.g. HDFC, LIC Housing Finance Ltd., etc, and authorized dealers to grant housing loans to NRI nationals for acquisition of a NRI house/flat for self-occupation subject to certain conditions. Criteria regarding the purpose of the loan, margin money and the quantum of loan will be at par with those applicable to resident Indians. Repayment of the loan should be made within a period not exceeding 15 years, out of inward remittance through banking channels or out of funds held in the investors’ NRE/FCNR/NRO accounts.
Still have questions?
He documentation required to be submitted by the NRIs are different from the Resident Indians as they are required to submit additional documents, like copy of the passport and a copy of the works contract, etc. and of course NRIs have to follow certain eligibility criteria in order to get Home Loans in India.
Another vital document required while processing an NRI home loan is the power of attorney (POA). The POA is important because, since the borrower is not based in India; the Home Finance Company would need a ‘representative’ ‘in lieu of’ the NRI to deal with and if needed. Although not obligatory, the POA is usually drawn on the NRI’s parents/wife/children/ close relatives or friends
Since general permission is not available to NRI/PIO to acquire agricultural
land/plantation property/farm house in India, such proposals will require
specific approval of Reserve Bank and the proposals are considered in
In consultation with the Government of India.
The mere acquisition of property does not attract income tax. However, any income accruing from the ownership of it, in the form of rent (if it is let out)/annual value of the house (if is not let out and it is not the only residential property owned by that person in India) and/or capital gains (short term or long term) arising on the sale of this house or part thereof is taxable in the hands of the owner.
Do NRI/PIO/OCI have to file return in India for their property rental income and Capital Gains Tax?
The Government Of India Has Granted General Permission For NRI/PIO/OCI To Buy Property In India And They Do Not Have To Pay Any Taxes Even While Acquiring Property In India. However, Taxes Have To Be Paid If They Are Selling This Property. 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 Gains.
Tax on income from immovable property selling/renting?
If They Have Held The Property For Less Than Or Equal To 3 Years After Taking Actual Possession Then The Gains Would Be Short Term Capital Gains, Which Are To Be Included In Their Total Income As Tax As Per The Normal Slab Rates Shall Be Payable And If The Property Has Been Held For More Then 3 Years Then The Resultant Gain Would Be Long Term Capital Gains Subject To 20% Tax Plus Applicable Cess.
How does the Double Taxation Avoidance Agreement work in the context of tax on income and Capital Gains tax paid in India by NRI?
India Has DTAA’s With Several Countries Which Give A Favorable Tax Treatment In Respect Of Certain Heads Of Income. 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.
Yes. Long-term and short-term capital gains are taxable in the hands of non-residents.
Type Of Asset: Assets Like House Property, Land And Building, Jewellery, Development Rights Etc. Rate Of Tax Deduction At Source (TDS)
- Long Term – 20.6%
- Short Term – 30.9%.
Exemption Available (Only For Long Term Capital Gains) The Long Term Capital Gains Arising On Sale Of A Residential House Can Be Invested In Buying/ Constructing Another Residential House, Within The Prescribed Time. The Exemption Is Restricted To The Amount Of Capital Gains Or Amount Invested In New Residential House, Whichever Is Lower. If The Amount Of Capital Gains Is Invested In Bonds Of National Highways Authority Of India.
(NHAI) Or Rural Electrification Corporation, Then The Entire Capital Gains Is Exempted, Else The Proportionate Gain Is Exempted. As Per The Financial Budget 2007-08, A Cap Of Rs. 50 Lakhs Has Been Imposed On Investment That Can Be Made In Capital Tax Saving Bonds.
Yes. Long-term and short-term capital gains are taxable in the hands of non-residents.