It is very important to understand that all the transactions and investments made by Non Resident Indians are governed by the provisions of Foreign Exchange Management Act (FEMA). The Act clearly segregates all the transactions of NRI into three categories;
- Prohibited Transactions
- Transactions covered under â€œPermission from Central Governmentâ€.
- Transactions covered under â€˜Permission from Reserve bank of Indiaâ€.
General Permission on purchase of property:
RBI has been granted permission to restrict or regulate purchase or sale of immovable property in India by a person outside India. General permission is available to a NRI and a Person of Indian Origin (PIO) to acquire any immovable property excluding agricultural / plantation property / farm house in India. In other words there is no restriction on purchase of residential or commercial property in India. The Act also does not put any restriction on the number of residential or commercial property that can be purchased in India neither they are required to submit any documents with the Reserve Bank in relation to such purchase under general permission.
An NRI can even hold, own or transfer any immovable property in India without any general permission if he had either acquire it when he was a resident in India or inherited from a person resident in India.Â Thus it is understood that the property has to be acquired by a person resident in India to avoid seeking permission from RBI.
Restriction on Sale proceeds:
However RBI has put restriction on repatriation of sale proceeds of number of house property in India. It states that NRI / PIO can only repatriate sale proceeds of two house properties from India in the name of a single person only.
It is also very interesting to note that an NRI is also entitled to deduction in respect of interest on loan for residential house property to the extent of Rs.150000. He is entitled to get deduction for principal amount to the extent of Rs.100000 as per Section 80C of the Income Tax Act.
NRIs have been given a special status and they are entitled to various exemptions, deductions and other tax concessions in accordance with the provisions of the Income tax Act. The Act has liberalized the rules and regulations relating to NRIs who would like to invest in real estate in India.