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NRI Corner

  • Bank Loan Information
  • Tax Implication
  • FAQs

  • Home Loans for NRI
  • Broadly categorized, Non-Resident Indians qualifying for NRI housing loans are
  • Eligibility for NRI
  • RBI Directive for Loans
  • What are the lists of documents required for home loans?
  • Are NRI/PIO/OCI eligible for Housing loans to buy property from any Indian Bank?
  • In what way the Non-resident Indian can finance the flat?
  • Can NRIs obtain loans for acquisition of a house/flat for residential purpose from financial institutions providing housing finance?
  • Can Indian companies grant loans to their NRI staff?
  • What types of transactions are permitted?
  • What types of account can be opened?
  • What should be the method of payment for purchasing residential immovable property in India by foreign nationals of Indian origin under the general permission?
  • How does FCNR differ from NRE account?

The Non-Resident Indians (NRIs) are recognized under the Foreign Exchange Regulatory Act (FERA), 1973. All banks and housing finance companies follow the RBI guidelines to define NRI - "An Indian citizen who holds a valid document like Indian passport and who stays abroad for employment or for carrying on business or vocation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay in abroad is an NRI ."

- Indian citizens who stay abroad for employment or for carrying on business or vocation outside India or for any other purpose in circumstances indicating an indefinite period of stay abroad;

- Government servants who are posted abroad on duty with the Indian missions and similar other agencies set up abroad by the Government of India where the officials draw their salaries out of Government resources;

- Government servants deputed abroad on assignments with foreign Governments or regional/ international agencies like the World Bank, International Monetary Fund (IMF), World Health Organization (WHO), Economic and Social Commission for Asia and the Pacific (ESCAP),etc.

- Officials of the State Government and Public Sector Undertakings deputed abroad on temporary assignments or posted to their branches or offices abroad.

The eligibility criteria of NRIs differ from Resident Indians based on a few parameters. The parameters include:

Age: Minimum age 21 years. Age of the borrower along with repayment period should not be beyond 60 years.

Qualification: The NRI loan seeker has to be a graduate.

Income: The loan applicant has to have a minimum monthly income of $ 2,000 (although, this criterion may differ across (Housing Finance Companies). The eligibility is also determined by the stability and continuity of your employment or business.

Payment options: The NRI also has to route his EMI (Equated Monthly Installments) cheques through his NRE/NRO account. He cannot make payments from another source say, his savings account in India.

Number of dependants: The eligibility of the applicant is also determined by the number of dependents, assets and liabilities.

The Reserve Bank of India (RBI) has clarified that Non-Resident Indians (NRIs) and Persons of Indian Origin (PIO), purchasing immovable property in India should pay for the acquisition by funds received in India through normal banking channels by way of inward remittance from outside the country.

The NRIs and Resident Indians can also acquire immovable property in India other than agricultural property, plantation or a farmhouse. It has issued certain directive for sanctioning home loans to Non-Resident Indians.

The guidelines provided are:

The home loan amount should not exceed 85% of the cost of the dwelling unit, as the remaining amount that is 15% needs to be provided an own contribution towards the cost of unit financed.

The cost of dwelling unit which is own contribution financed less the loan amount, can be met from direct remittances from abroad through normal banking channels, the Non-Resident (External) [NR(E)] Account and /or Non-Resident (Ordinary) [NR (O)] account in India.

However, repayment of the loan, comprising of the principal and interest including all the charges are to be remitted to the HFC from abroad through normal banking channels, the Non-Resident (External) [NR(E)] Account and /or Non-Resident (Ordinary) [NR (O)] account in India.

The repayment option for NRIs as they can pay through the funds held in any non-resident account maintained in accordance with the provisions of the Foreign Exchange Management Act(FEMA), 1999, and the regulations made by the RBI from time to time. As most of the home loan provider companies consider the economical stability of the applicant, home loans for NRIs are quite feasible, because they are well in economic resource.

Self-employed individuals

 

  • Balance sheets and P&L a/c of the company for last 3 years
  • Bank a/c statements for last 6 months for company and individual, both
  • Income tax returns (3 years)
  • Passport/visa copy
  • Utility bill for address proof
  • PIO/OCI card
  • Power of Attorney (if applicable, in respective bank’s format)
  • Credit check report
  • Property agreement or other related docs

 

 

 

 

 

Salaried individuals

 

  • Copy of employment contract
  • Latest Salary slip
  • Latest work permit
  • Bank statement for 4 months or NRE/NRO a/c 6 months statement
  • Passport/visa copy
  • Utility bill for address proof
  • PIO/OCI card
  • Power of Attorney (if applicable, in respective bank’s format)
  • Customer credit check report
  • Property agreement duly registered or other related docs
  • Income Tax returns last 2 years

 

An authorised dealer or a housing finance institution in India approved by the National Housing Bank may provide housing loan to a non-resident Indian or a person of Indian origin residing outside India. for acquisition of a residential accommodation in India, subject to the following conditions, namely:

A) The quantum of loans, margin money and the period of repayment shall be at par with those applicable to housing finance provided to a person residing in India.

B) The loan amount shall not be credited to Non-resident External (NRE)/Foreign Currency Non-resident (FCNR)/Non-resident non-repatriable (NRNR) account of the borrower.

C) The loan shall be fully secured by equitable mortgage by deposit of title deal of the property proposed to be acquired, and if necessary, also be lien on the borrower’s other assets in India.

D) The instalment of loan, interest and other charges, if any, shall be paid by the borrower by remittances from outside India through normal banking channels or out of funds in his Non-resident External (NRE)/Foreign Currency Non-resident (FCNR)/Non-resident Non-repatriable (NRNR)/Non-resident Ordinary (NRO)/non-resident Special Rupee (NRSR) account in India, or out of rental income derived from renting out the property acquired by utilization of the loan or by any relative of the borrower in India by crediting the borrower’s loan account through the bank account of such relative (The word ‘relative’ means ‘relative’ as defined in section 6 of the Companies Act, 1956.)

E) The rate of interest on the loan shall conform to the directives issued by the Reserve Bank of India or, as the case may be, the National Housing Bank.

The purchase of the flats can be financed from the fresh remittance through the normal banking channels or from payment from original non-resident account or from Non-resident (External) Accounts. Non-resident Indians who are citizens of India (India Passport holders) are eligible for housing finance for the acquisition of an immovable property or construction of a new house, or a flat for their occupation or for that of their family in India.

The Reserve Bank has granted general permission to certain financial institutions providing housing finance. 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.

The Reserve Bank permits Indian firms to grant housing loans to their employees deputed abroad and holding Indian passport subject to certain conditions.

All types of transactions of deposits and withdrawals to and from NRO account are normally permitted. However, the RBI has prescribed certain transactions requires to be reported to RBI in prescribed forms.

NRE, NRO or FCNR Accounts.

Payment for the purchase of property can be made either by way of funds remitted to India from abroad through regular banking channels or through the balance in the NRE, NRO or FCNR Account which can be opened in the categories of current, savings, and recurring and term deposit accounts maintained with banks in India.

The FCNR accounts, primarily differ from NRE account on the point of fact that the balance in FCNR account is denominated in designated foreign currency in which the account is opened and thus unlike NRE accounts, there is no loss either on account of difference between buying and selling rates or on account of fluctuation in exchange rates. The deposits in FCNR accounts can be withdrawn prior to maturity date.

  • Is the interest earned exempted from tax?
  • Can the rental income from such property be remitted outside India?
  • What is the Tax treatment for income generated from property selling or renting for NRI/ PIO/ OCI?
  • Does NRI/ PIO/ OCI have to file return in India for their property rental income and Capital Gains Tax?
  • How does the Double Taxation Avoidance Agreement(DTAA) work in the context of tax on income and Capital Gains tax paid in India by NRI?
  • Does Capital Gains Tax (CGT) apply to NRI/ PIO/ OCI?
  • Who should file tax returns?
  • Are there any exceptions?
  • What's the best way to file tax returns?

Interest earned on FCNR account is exempted from income tax and the balance in the account is exempted from wealth tax. Interest on NRE account is not exempted from Income tax and balances to the credit of NRE account are not exempted from wealth tax.

No. Such income cannot be remitted abroad and will have to be credited to the ordinary non-resident rupee account of the owner of the property.

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 it 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.

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. 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 than 3 years then the resultant gain would be long term capital gains subject to 20% tax plus applicable cess.

India has DTAA’s with several countries which give a favourable 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.

If you are an NRI/ OCI/ PIO, you would have to file your income tax returns if you fulfil either of these conditions:

 

  • Your taxable income in India during the year was above the basic exemption limit of 1.6 lakh 
    OR
  • You have earned short-term or long-term capital gains from sale of any investments or assets, even if the gains are less than the basic exemption limit.

 

Note: The enhanced exemption limit for senior citizens and women is applicable only to residents and not to non-residents.

Yes, there are two exceptions:

 

  • If your taxable income consisted only of investment income (interest) and/or capital gains income and if tax has been deducted at source from such income, you do not have to file your tax returns.
  • If you earned long term capital gains from the sale of equity shares or equity mutual funds, you do not have to pay any tax and therefore you do not have to include that in your tax return

 

Tip: You may also file a tax return if you have to claim a refund. This may happen where the tax deducted at source is more than the actual tax liability. Suppose your taxable income for the year was below 1.6 lakh but the bank deducted tax at source on your interest amount, you can claim a refund by filing your tax return.

Another instance is when you have a capital loss that can be set-off against capital gains. Tax may have been deducted at source on the capital gains, but you can set-off (or carry forward) capital loss against the gain and lower your actual tax liability. In such cases, you would need to file a tax return.

Traditionally, you could file your return either by giving a power of attorney to someone in India or by sending your form and documents to a tax expert in India who would then file returns on your behalf.

But nowadays, the easiest option for NRIs to file their Indian tax returns is by using the online platform. There are several options to file online.

  • Who is an NRI?
  • Who is OCI?
  • Who is a PIO?
  • What are the documents required for buying a property?
  • Can the funds be repatriated?
  • What is the position regarding acquisition of immovable property by NRI?
  • Do foreign citizens of Indian origin require permission of the Reserve Bank to purchase immovable property in India for their residential use?
  • What formalities have to be completed by foreign citizens of Indian origin to purchase residential immovable property in India under the general permission?
  • Can such property be sold without the permission of Reserve Bank?
  • Are there any conditions required to be fulfilled if repatriation of the sale proceeds is desired?
  • What is the procedure for seeking such repatriation?
  • Can foreign citizens of Indian origin acquire or dispose residential property by way of gift?
  • Can foreign citizens of Indian origin acquire commercial properties in India?
  • Can they dispose of such properties?
  • Can the sale proceeds of such property be remitted out of India?
  • Can the properties (residential/ commercial) be given on rent if not required for immediate use?
  • Can Non-resident Indians staying abroad purchase a property through an agent or the Power of Attorney?

Under the Foreign Exchange Management Act, 1999, Non-resident Indians are:

Indian citizens who stay abroad for employment or carrying on business or vocation outside India or for any other purpose in circumstances indicating an uncertain period of stay abroad; OR,
Government servants who are posted abroad on duty with the Indian Mission and similar other agencies set up abroad by the Government of India where the officials draw their salaries out of Government resources; OR,
Government servants deputed abroad on assignments with foreign government or regional/ international agencies like the World Health Organization (WHO), Economic and Social Commission for Asia and the Pacific (ESCAP); OR, 
An Official of the State Government and Public Sector Undertakings deputed abroad on temporary assignments or posted to their branches or offices abroad.

Overseas Citizenship of India

(A) Any person of full age and capacity:

 

  • 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
  • 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
  • Who is a citizen of another country, but belongs to a territory that became part of India after the 15th Day of August, 1947.
  • Who is a child of such a citizen, or

 

(B)A person, who is minor child of a person mentioned in clause (A)
Provided that no person, who is or had been a citizen of Pakistan, Bangladesh shall be eligible for registration as an Overseas Citizen of India.

Person of Indian Origin (PIO) (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 whose grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).
  • Pan card (Permanent account number)
  • OCI/PIO card (In case of OCI/PIO)
  • Passport (In case of an NRI)
  • Passport size photographs
  • Address proof

The funds can be freely withdrawn for the local disbursements without RBI approval. Interest is now repatriable.

Consequent to the liberalization in exchange control policy and procedures, certain relaxations in the existing regulations and procedures governing the acquisition, holdings, etc. of immovable property in India have been announced. The current position in therefore as under:
 

 

  • Non-resident Indians holding Indian passport do not require any permission from RBI for acquiring immovable property for bonafide residential purposes.
  • Non-resident Indians holding Indian passport may pay the purchase consideration either by remittance of funds from abroad through normal banking channels or out of NRO account or NRE account or FCNR account.
  • RBI has given general permission to non-resident Indians holding foreign passport (i.e. foreign citizens of Indian origin) to acquire, hold, transfer or dispose of by way of sale or inheritance immovable properties situated in India provided:
    • The property is for the purchaser's bonafide residential purpose
    • The purchase consideration is met either by remittance of funds from abroad through normal banking channels or out of NRE account or FCNR
  • Foreign citizens of Indian origin are required to declare the properties to RBI within a period of 90 days from the date of purchase in form IPI 7. The following documents must be submitted along with the declaration:
    • A certified copy of the purchase deed or a certificate from the Cooperative Housing Society or an Association of the apartment owners as an evidence of transfer/ registration of the property in the declarant's name.
    • Certificate from the declarant's bankers in India evidencing receipt of inward remittance(s) in foreign exchange through normal banking channel or withdrawal of funds from declarant's NRE account or FCNR account or FCNR Special Deposit Account and payment of consideration for the property out of those funds.
  • Where a foreign citizen of Indian origin wishes to acquire a property out of funds held in NRO account then the permission from RBI will be required which can be applied for in form IPI 1.
  • Where a foreign citizen of Indian origin wishes to acquire a property from the sale proceeds of another property, prior permission of RBI is essential and may be obtained by applying in form IPI 1.
  • Any number of properties can be acquired by non-resident Indians regardless of whether they are holding Indian passport provided they are required for bonafide residential purposes.
  • A person resident outside India who has established in India a branch or place of business (but not a mere liaison office) in accordance with RBI regulations, can acquire any immovable property in India, which is necessary for incidental to carrying on such activity.

No. However, the 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 bona fide residential purpose. They are, therefore, not required to obtain separate permission of The Reserve Bank.

They are required to file a declaration in form of IPI 7 with the Central Office of Reserve Bank at Mumbai within a period of 90 days from the date of purchase of immovable property or final payment of purchase consideration along with a certified copy of the documentary evidence for the transaction and bank certificate for the money paid.

Yes. Reserve Bank has granted general permission for sale of such property. However, where the property is purchased by another foreign citizen of Indian origin, funds towards the purchase consideration should either be remitted to India or paid out of balances in NRE/FCNR accounts.

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 the 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 The Reserve Bank at Mumbai within 90 days of the sale of the property.

The Reserve Bank has 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, provided gift tax has been paid.

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 purchaser's NRE/ FCNR accounts maintained with banks in India. A declaration has to be 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.

Yes.

Yes. Repatriation of original investment in respect of properties purchased by foreign citizens of Indian origin on or after 26 May 1993 can be remitted up to the consideration amount originally remitted from abroad, provided the property is sold after a period of three years from the date of the final purchase deed or from the date of payment of final instalment of consideration amount, whichever is later. Applications for the purpose are required to be made to the Central Office of Reserve Bank within 90 days of the sale of property in form IPI 8.

Yes. The Reserve Bank 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.

The non-resident Indians who are staying abroad may enter into an agreement through their relatives and/ or by executing the Power of Attorney in their favour as it is not possible for them to be present for completing the formalities of purchase (negotiating with the builder or Developer, drafting and signing of agreements, taking possession, etc.) These formalities can be completed through some known person who can be given the Power of Attorney for this purpose. Power of Attorney should be executed on the stamp paper before the proper authorities in foreign countries. Power of Attorney cannot be drafted on the stamp paper bought in India.