Non Resident Indians (NRIs) can buy and hold any number of properties in India and there are no restrictions with regard to this aspect. However, there are some restrictions pertaining to the transfer of real estate that they need to follow.
These restrictions are pretty straightforward and comprehensive. In this article, we will provide you with all the information that you must know as an NRI before transferring any properties to your relatives, friends or buyers.
- If you have an agricultural land or a farm house, you can transfer it only to a citizen of India. You cannot transfer it to any other NRI or Person of Indian Origin (PIO). This clarifies that it cannot be transferred to foreign nationals under any circumstances
- However, if you have a general residential property, you can transfer it to not only an Indian citizen but other NRIs and PIOs.
Conditions for remittances outside India
While the government of India is quite flexible with NRIs, there are certain conditions which one need to be aware of before making any real estate transactions in India.
The law of the land does not allow repatriation of sale proceeds generated through the sale of agricultural land. The same condition applies on farm house and plantation properties as well.
On the other hand, NRIs can remit funds raised by the sale of commercial and residential properties as per certain guidelines. Under any case, the amount of repatriation cannot exceed the amount of total sale proceeds generated out of a property transaction.
Also, the regulatory framework has kept an upper limit of repatriation to maximum US$1 million per financial year. The amount of repatriation must be derived after settling all the applicable local taxes and charges. Furthermore, there is also a restriction that an NRI cannot repatriate funds from more than two property transactions.
In case the real estate sold by an NRI was acquired as a gift, the sale proceeds out of the transaction must be deposited in an NRO (Non Resident Ordinary) Rupee account, and not any other type of bank account.
It is one of the most frequently asked questions (FAQs) that how an NRI should treat rental income? Can he use it for his purposes in the foreign land that means can he repatriate this income from India to the country he works in?
What about rental income generated by NRIs?
There is a very simple thumb rule for this. One does not need to think too much about it – the government of India has kept the maximum amount of repatriation to US$1 million in a financial year. Whatever an NRI generates in India during a financial year, the total amount of repatriation has to be under US$1 million.
As a word of caution, as an NRI, never ever do any real estate transaction through foreign currency or travellers’ cheques.
The payments towards purchase of any property transaction should be made through either Non Resident External (NRE) account, NRO account or Foreign Currency Non Resident (FCNR) accounts.