Here’s what NRIs must know about property ownership in India

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There are various rules and Acts that govern the ownership and transactions related to properties by non-resident Indians (NRIs) and overseas citizens of India (OCI).

Acquisition and transfer of immovable properties in India by persons residing outside India, including NRIs and OCIs, are governed by the Foreign Exchange Management Act, 1999 (FEMA) and regulations issued by the Reserve Bank of India (RBI). FEMA defines an NRI as a 'person resident outside India' who is a citizen of India, and an OCI is a 'person resident outside India' who is registered as an overseas citizen of India cardholder under Section 7(A)the Citizenship Act, 1955.

Under the regulations issued by the RBI, an NRI or an OCI may purchase any number of residential or commercial properties in India. Besides purchase, an NRI or an OCI may also acquire any residential or commercial property by way of gift from any of his NRI, OCI or resident relatives.

Purchase or acquisition by way of gift, of agricultural land, farmhouse, or plantation property is not allowed for NRIs and OCIs. However, an NRI or OCI may acquire any immovable property in India by way of inheritance from a person resident in India.

When a property is being inherited by an NRI or OCI from a person resident outside India, it is permitted if the property was acquired in the first place in accordance with the applicable laws at the relevant time.

For the purchase of the immovable property, NRIs and OCIs may pay the consideration (including taxes, duties and levies in India) out of funds received in India through normal banking channels by way of inward remittance from any place outside India or held in NRE/ NRO /FCNR account. In any case, the payment cannot be made either by traveller’s cheque or by foreign currency notes.

Further, a non-resident spouse of an NRI or an OCI may also acquire immovable property in India jointly with his/ her NRI/ OCI spouse if their marriage is registered and has subsisted for a continuous period of not less than two years immediately preceding the acquisition of such property, and such non-resident spouse should not otherwise be prohibited from such acquisition.

There is no restriction on the transfer of immovable property by NRIs and OCIs. However, repatriation of the proceeds of sale is subject to certain restrictions.

If the NRIs or OCIs are selling properties which were acquired by them while they were resident in India, or which were inherited by them, then the sale proceeds may be repatriated up to $1 million per financial year subject to the payment of applicable taxes and satisfaction of authorised dealer bank.

If the properties have been acquired by the NRI/ OCI through inward remittance or out of funds held in FCNR(B) or NRE Account, then the NRI/ OCI may repatriate the entire sale proceeds, provided that in case of residential properties such repatriation is allowed for only up to two such properties.

When a property is acquired by an NRI or OCI by way of gift, the registered gift deed constitutes valid title documents and the same can be used for mutation, i.e. recording of the title in revenue records. Where a property is acquired through Will, depending on the state where the property is situated, a probate of the Will may be required to perfect the title. The Will, or where probate is compulsory, the probated Will can be used for mutation and other similar purposes.

NRIs or OCIs may often face difficulty in managing their properties and assets in India. They may authorise a person resident in India through a special power of attorney (POA). A special POA is normally issued for the limited purpose of execution of sale documents and other related matters, and the same can be revoked at any time.