According to the Foreign Exchange Management Act (FEMA), an NRI is a citizen of India who is a resident outside India. FEMA is the act which governs the purchase of Indian real estate by NRIs.

A PIO (not a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan) should have: At any time, held an Indian passport or Have a father or grandfather who was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955)

(a) Any person of full age and capacity:

(i) Who is a citizen of another country, but was a citizen of India at the time of, or anytime after the commencement of the constitution, or

(ii) Who is a citizen of another country, but was eligible to become a citizen of India at the time of commencement of the constitution, or

(iii) Who is a citizen of another country, but belongs to a territory that became part of India after the 15th day of August, 1947.

(iv) Who is the child of such a citizen, or

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

According to the general permission granted by the Reserve Bank of India (RBI), people under the following categories can freely purchase immovable property in India.

(a) Non-Resident Indian (NRI) (b) Person of Indian Origin (PIO) The general permission is only for the purchase of residential and commercial property and not for the purchase of plantation property /agricultural land / farmhouses in India. Overseas Citizens of India (OCI) can purchase immovable residential and commercial property in India.

Since general permission is not available for this purpose, an NRI / PIO would require specific approval from the Reserve Bank of India and such an approval would be granted only after considering the proposal in consultation with the Government of India.

The acquisition of property does not attract income tax. But, any income that is accrued from the ownership of the house, in the form of rent (if itis tenanted), or the annual value of the house (if it is not tenanted and it is not the only residential property owned by that person in India) and / or capital gains (short-term or long-term) arising from the sale of the 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 don’t have to pay any taxes even while acquiring property in India. But they have to pay taxes if they are selling the property. Rental income earned is taxable in India, and they will have to obtain a PAN card and file returns on income if they have rented out the property. If they sell the property, the profit on sale would 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. If they have held the property for more than 3 years, the resultant gains would be long-term capital gains subject to 20% tax plus applicable access.

(a) If the property was acquired out of foreign exchange sources, i.e., remitted through normal banking channels / by debit to NRE / FCNR (B) account, the amount to be repatriated should not exceed the amount paid for the property:

(i) In foreign exchange received through a normal banking channel or

(ii) By debit to NRE account (foreign currency equivalent, as on the date of payment) or debit to FCNR (B) account. Repatriation of sale proceeds of residential property purchased by NRIs/PIOs out of foreign exchange is restricted to not more than 2 such properties. Capital gains, if any, may be credited to the NRO account from where the NRIs/PIOs may repatriate an account up to USD one million per financial year, as discussed below.

(b)If the property was acquired out of rupee sources, the NRI/PIO may remit an amount up to USD one million, per financial year, out of the balances held in the NRO account (inclusive of sale proceeds of assets acquired by way of inheritance or settlement), for all the bonafide purposes to the satisfaction of the Authorized Dealer bank and subject to tax compliance. The NRI/PIO may use this facility to remit capital gains, where the acquisition of the subject property was made by funds sourced by remittance through normal banking channels / by debit to NRE/ FCNR (B) account.

The rental income, being a current account transaction, can be repatriated, subject to the appropriate deduction of tax and the certification thereof by a Chartered Accountant. Repatriation of sale proceeds is subject to certain conditions. The amount of repatriation cannot exceed the amount paid for acquisition of the immovable property in foreign exchange.

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

(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 through equitable mortgage by the deposit of the 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 instalments 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 / her 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 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.

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
– P10/0C1 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

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/lase copy
– Utility bill for address proof
– P10/0C1 card
– Power of Attorney (if applicable, in respective bank’s format)
– Credit check report
– Property agreement or other related docs