Who is a non-resident Indian (NRI)?
An Indian Citizen who stays abroad for employment / carrying on business or vocation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad is a non-resident. (Persons posted in U.N. organisation and officials deputed abroad by Central/State Governments and Public Sector undertakings on temporary assignments are also treated as non- residents). Non-resident foreign citizens of Indian Origin are treated on par with non-resident Indian citizens (NRIs).
Who is a person of Indian Origin ?
For the purpose of availing of the facilities of opening and maintenance of bank accounts and investments in shares/securities in India : A foreign citizen (other than a citizen of Pakistan or Bangladesh is deemed to be of Indian origin, if, (i) he, At any time, held an Indian passport (or) (ii) he or either of his parents or any of his grand parents was a citizen by virtue of the constitution of India or citizenship act, 1995 (57 of 1955).Note: A spouse (not being a citizen of Pakistan or Bangladesh) of an Indian origin is also treated as a person of Indian origin for the above purposes.B. For investments in immovable properties:A foreign citizen other than a citizen of Pakistan, Bangladesh, Sri Lanka or Nepal), Is deemed to be of Indian origin if, (i) he, At any time, held an Indian passport (or) (ii) he or either of his parents or any of his grand parents was a citizen by virtue of the constitution of India or citizenship act, 1995 (57 of 1955).
What is an OCB?
Overseas Corporate Bodies (OCBs) are bodies predominantly owned by individuals of Indian nationality or origin resident out side Indian and include overseas companies, partnership firms, societies and other corporate bodies which are owned, directly or indirectly, to the extent of atleast 60% by individuals of Indian nationality or origin resident outside India as also overseas trust in which atleast 60% of the beneficial interest is irrevocably held by such persons. Such ownership interest should be actually held by them and not in the capacity as nominees. The various facilities granted to NRIs are also available with certain exceptions to OCBs so long as the ownership/beneficial interest held in them by NRIs continues to be atleast 60%
Are OCBs required to produce any certificate regarding ownership/beneficial interest in them by NRIs?
Yes. In order to establish that the ownership/beneficial interest in any OCB held by NRIs is not less than 60%, the concerned body/trust is required to furnish a certificate from an overseas auditor / chartered / accountant /certified public accountant in form OAC where the ownership/beneficial interest is directly held by NRIs, and in form OAC 1 where it is held indirectly by NRIs and further that such ownership interest is actually held by them and not in the capacity as nominees.
What are the various facilities available to NRIs/OCBs?
NRIs/OCBs are granted the followings facilities: Maintenance of bank accounts in India. Investments in securities/shares of, and deposits with, Indian firms/companies. Investments in immovable properties in India. Details of these facilities are given in Chapters II,III and IV.
Do non-resident Indian citizens require permission of Reserve Bank to acquire residential/commercial property in India?
Do foreign citizens of Indian origin require permission of Reserve Bank to purchase immovable property in India for their residential use?
Yes. However, Reserve Bank 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 Reserve Bank.
In what manner the purchase consideration for the residential immovable property should be paid by foreign citizens of India origin under the general permission?
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.
What are the formalities required to be completed by foreign citizens of Indian origin for purchasing residential immovable property in India under the general permission?
They are required to file a declaration in form 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 document evidencing the transaction and bank certificate regarding the consideration paid..
Can such property be sold without the permission of Reserve Bank?
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.
Can sale proceeds of such property if and when sold be remitted out of India?
In respect of residential properties purchased on or after 26th May 1993, Reserve Bank 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 26th May 1993, will have to be credited to the oridinary non-resident rupee account of the owner of the property.
Are conditions required to be fulfilled if repatriation of sale proceeds id desired?
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.
What is the procedure for seeking such repatriation?
Applications for necessary permission for remittance of sale proceeds should be made in from IPI 8 to the Central Office of Reserve Bank at Mumbai within 90 days of the sale of the property.
Can foreign citizens of Indian origin acquire or dispose of residential property by way of gift?
Yes. Reserve Bank has granted general permission to foreign citizens of Indian origin to acquire or dispose of properties up to two house 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.
Can foreign citizens of Indian origin acquire commercial properties in India?
Yes. Under the general permission granted by Reserve Bank 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 and a declaration is submitted to the Central Office of Reserve Bank in from IPI 7 within period of 90 days from the date of purchase of the property/final payment of purchase consideration.
Can they dispose of such properties?
Can sale proceeds of such property be remitted out of India?
Yes. Repatriation of original investment in respect of properties purchased by foreign citizens of Indian origin on or after 26th May 1993 will be allowed to 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 from IPI 8.
Can the properties (residential/commercial) be given on rent if not required for immediate use?
Yes. 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 has to be credited to NRO account.
Can NRIs obtain loans for acquisition of a house/flat for residential purpose from financial institutions providing housing finance?
Reserve Bank has granted general permission to certain financial institutions providing housing finance e.g. HDFC, LIC Housing Finance Ltd., etc., to grant housing loans to non-resident Indian nationals for acquisition of houses/flats for self-occupation subject to certain conditions. The borrower is required to meet at least 25% of the cost by way of foreign inward remittance through banking channels or out of funds held in his NRE/FCNR accounts.
Can authorised dealer loans to NRIs for acquisition of a flat/house for residential purpose?
Authorised dealers have been granted permission to grant loans up to Rs. 10 lakhs to non-resident Indian nationals for acquisition of only one house/flat for self-occupation on his return to India subject to certain conditions. At least 25 per cent of the cost should however be remitted from abroad by way of foreign inward remittance through banking channels or out of funds held in the investor’s NRE/FCNR accounts.