An NRI/PIO resident outside India may invest by way
of contribution to the capital of partnership firm
or a proprietorship concern in India on
non-repatriation basis. The firm or proprietary
concern should not be engaged in any agricultural
/plantation or real estate business i.e. dealing in
land and immovable property or earning income
therefrom. However, they can invest with
repatriation benefits only with the prior approval
of Secretarial for Industrial Assistance (SIA).
Both NRIs and PIOs can invest in limited companies
engaged in real estate development. The paid up
value of shares/convertible debentures purchased by
an NRI both on repatriation and non-repatriation
basis should not exceed five per cent of the paid-up
capital/paid up value of each series of debentures.
The aggregate paid up value of shares/convertible debentures purchased
by all NRIs should not exceed 10 per cent of the
paid up capital of the company /paid up value of
series of debentures. However it can be raised to 24
per cent if general body of the Indian company
concerned passes a special resolution to that
effect.
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6) NRI FAQ Guidelines
1] What are the norms for Indian citizen resident outside
India to acquire and transfer property
in India?
A person resident outside India who is a citizen of India
may acquire any immovable property in India other than
agricultural/plantation/farm house, and transfer any immovable
property in India to a person resident in India, transfer any
immovable property other than agricultural or plantation property or
farmhouse to a person resident outside India who is a citizen of
India or to a person of Indian origin resident outside India.
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2] Norms for a Person of Indian Origin to acquire and
transfer property in India!
A person of Indian origin resident outside India may
acquire any immovable property other than agricultural/ farm house/
plantation property in India by purchase, from out of funds received
in India by way of inward remittance from any place outside India or
funds held in any non-resident account maintained in accordance with
the provisions of the Act and the regulations made by the Reserve
Bank under the Act; acquire any immovable property in India other
than agricultural land / farm house /plantation property by way of
gift from a person resident in India or from a person resident
outside India who is a citizen of India or from a person of Indian
origin resident outside India; acquire any immovable property in
India by way of inheritance from a person resident outside India who
had acquired such property in accordance with the provisions of the
foreign exchange law in force at the time of acquisition by him or
the provisions of these Regulations or from a person resident in
India; transfer any immovable property in India other than
agricultural land/farm house/plantation property, by way of sale to
a person resident in India; transfer agricultural land/farm house/
plantation property in India, by way of gift or sale to a person
resident in India who is a citizen of India; transfer residential or
commercial property in India by way of gift to a person resident in
India or to a person resident outside India who is a citizen of
India or to a person of Indian Origin resident outside India.
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3] Acquistion of immovable property for carrying on a
permitted activity by a person resident outside India!
A person resident outside India who has established in
India in accordance with the Foreign Exchange Management
(Establishment in India of Branch or Office or other Place of
Business) Regulations, 2000, a branch, office or other place of
business for carrying on in India any activity, excluding a iaison
office, may acquire any immovable property in India, which is
necessary for or incidental to carrying on such activity; Provided
that all applicable laws, rules, regulations or directions for the
time being in force are duly complied with; and ii) the person files
with the Reserve Bank a declaration in the form IPI annexed to these
regulations, not later than ninety days from the date of such
acquisition; transfer by way of mortgage to an authorised dealer
as a security for any borrowing, the immovable property acquired in
pursuance of clause (a).
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4] Repatriation of Sale proceeds of immovable property!
A person referred to in sub-section (5) of Section 6 of the
Act, or his successor shall not, except with the prior permission of
the Reserve Bank, repatriate outside India the sale proceeds of any
immovable property referred to in that sub-section; In the event of
sale of immovable property other than agricultural land/farm house
/plantation property in India by a person resident outside India who
is a citizen of India or a person of Indian unauthorised dealer may
allow repatriation of proceeds outside India, provided the following
conditions are satisfied, namely: the immovable property was
acquired by the seller in accordance with the provisions of the
foreign exchange law in force at the time of acquisition by him or
the provisions of these Regulations; the sale takes place after
three years from the date of acquisition of such immovable property
or from the date of payment of final instalment of consideration for
its acquisition, whichever is later; and the amount to be
repatriated does not exceed
(a) the amount paid for acquisition of
the immovable property in foreign exchange received through
normal banking channels or out of funds held in Foreign Currency
Non-Resident Account or (b) the foreign currency equivalent, as on
the date of payment, of the amount paid where such payment was made
from the funds held in Non-Resident External account for acquisition
of the property; in the ease of residential property, the repatriation of sale proceeds is restricted to not more than two
such properties. A significant development is that repatriation of
sale proceeds of immovable property, acquired even out of rupee
funds is available now subject to the condition that the property
should have been held for a minimum period of 10 years. There is no
lock-in period in respect of immovable property acquired by way of
inheritance/legacy.
For repatriation, NRIs can approach the authorised dealers of foreign exchange without the need of going through RBI now. The repatriation in the case of residential properties is restricted to not more than two such properties. Even the rental income arising out of investment in real estate can be repatriated every year. In fact authorised dealers may allow NRIs/PIOs the facilities of repatriation of funds out of balances held in their NRO accounts upto US$1 million per calendar year, including sale proceeds of immovable property, subject to production of an undertaking by the remitter and a certificate by a chartered accountant in the formats prescribed by the CBDT.
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5] Withhold tax rate!
Following are the withholding tax rate as per Finance Act 2004 for
FY 2004-05 :
• Rental/ business income - 30% + applicable surcharge
• Short term capital gains - 30%+ applicable surcharge
• Long term capital gains - 20% + applicable surcharge
• Surcharge is 10% for individuals if taxable income exceeds
Rs.8.5
lacs, else no surcharge
The tax laws may vary in future on account of amendments,
modifications, etc
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