Question 1

Who qualifies as a Non-Resident Indian (NRI)?

Accepted Answer

A “Non-Resident Indian” (NRI) is determined by the definition of a “Person resident in India” as outlined in Section 2(v) of the Foreign Exchange Management Act (FEMA), 1999.

An individual qualifies if they resided in India for more than 182 days during the previous financial year, except those who: 
  Have left India for employment, business, or an intention to remain abroad indefinitely. 
  Stay in India for reasons indicating an intention to remain for an indefinite period.

The definition also covers corporate bodies registered in India, and offices or branches in India owned by persons resident outside India. Under Section 2(u), a “person” includes individuals, Hindu undivided families, companies, firms, and associations.

Question 2

What defines a Person of Indian Origin (PIO)?

Accepted Answer

While FEMA 1999 does not provide a single definition, the Reserve Bank of India defines a PIO based on the specific activity intended:

• For Bank Accounts: A citizen of any country (except Bangladesh or Pakistan) who held an Indian passport, has parents/grandparents who were Indian citizens, or is a spouse of an Indian citizen.

• For Investing (Shares/Debentures): Similar to bank accounts, applies to citizens of countries other than Bangladesh or Pakistan.

• For Immovable Property: A citizen of any country except Bangladesh, Pakistan, Sri Lanka, Afghanistan, China, Hong Kong, Macau, Iran, Nepal, and Bhutan who held an Indian passport or has parents/grandparents who were Indian citizens.

• For Establishing an Office/Branch: Applies to citizens of countries other than Bangladesh, Pakistan, Sri Lanka, Afghanistan, China, Iran, Hong Kong, or Macau.

• For a PIO Card: A citizen of any country (except Bangladesh or Pakistan) who held an Indian passport, was born in India (or has ancestors born in India) as defined in the Government of India Act 1935, or is a spouse of an Indian citizen/PIO.

Question 3

What is an Overseas Citizen of India (OCI)?

Accepted Answer

An Overseas Citizen of India (OCI) is an individual of full age and capacity who is a citizen of another country but meets any of the following criteria:

• Was an Indian citizen at the commencement of the Constitution or any time thereafter.
• Was eligible to become an Indian citizen when the Constitution came into effect.
• Belongs to a territory that became part of India after August 15, 1947.
• Is a child or a minor child of a person described in the categories above.

Note: Any person who is or has ever been a citizen of Pakistan or Bangladesh is ineligible for OCI registration.

Question 4

Who is eligible to purchase immovable property in India?

Accepted Answer

Under general permission from the Reserve Bank of India (RBI), the following categories can freely purchase residential or commercial property:

• Non-Resident Indian (NRI): A citizen of India residing outside the country.
• Person of Indian Origin (PIO): An individual (excluding citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, or Bhutan) who previously held an Indian passport or has a father/grandfather who was an Indian citizen.
• Overseas Citizen of India (OCI): Eligible to purchase immovable property under the same general permissions.

Important Restrictions:
This permission is strictly limited to residential and commercial properties. It does NOT allow the purchase of agricultural land, plantation property, or farmhouses in India.

Question 5

Are there any limitations on the number of residential or commercial properties an NRI/PIO can buy under the general permission?

Accepted Answer

There are no restrictions on the number of residential or commercial properties that NRIs and PIOs can purchase under the general permission available.

Question 6

Can a foreign national of non-Indian origin be added as a co-owner to a property purchased by an NRI/PIO?

Accepted Answer

No

Question 7

Is a foreign national of non-Indian origin, residing outside India, allowed to purchase immovable property in India?

Accepted Answer

No

Question 8

Can a foreign national of non-Indian origin lease residential property in India?

Accepted Answer

Yes, A foreign national of non-Indian origin, including citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Hong Kong, Macau, Iran, Nepal, or Bhutan, is permitted to acquire residential accommodation on a lease for up to five years without requiring prior permission from the Reserve Bank of India.

Question 9

Can NRI/PIO acquire residential or commercial property as a gift under the general permission?

Accepted Answer

Under general permission, NRIs or PIOs may acquire residential or commercial property as a gift from a resident of India, another NRI, or a PIO.

Question 10

Is it possible for a foreign national of non-Indian origin, residing outside India, to acquire residential or commercial property in India through a gift?

Accepted Answer

No

Question 11

Can an NRI, PIO, or foreign national of non-Indian origin acquire agricultural land, plantation property, or a farmhouse in India as a gift?

Accepted Answer

No

Question 12

Can an NRI, PIO, or foreign national of non-Indian origin inherit and hold immovable property in India from someone residing outside India?

Accepted Answer

With specific approval from the Reserve Bank, a person residing outside India may hold immovable property in India that has been inherited from another non-resident, provided that the deceased had acquired the property in compliance with the foreign exchange laws in effect at the time of acquisition or under FEMA regulations.

Question 13

To whom can an NRI sell their residential or commercial property in India?An NRI

Accepted Answer

Can transfer a residential or commercial property in India through a sale to either a resident of India, another NRI, or a Person of Indian Origin (PIO).

Question 14

Who can a PIO sell their residential or commercial property to?

Accepted Answer

A Person of Indian Origin (PIO) can transfer residential or commercial property in India only to someone who is a resident of India.

Question 15

Can a PIO sell their residential or commercial property to another NRI or PIO?

Accepted Answer

He must obtain prior approval from the Reserve Bank for transferring residential or commercial property in India to an NRI or a PIO through a sale.

Question 16

Can a foreign national of non-Indian origin, whether residing in India or outside, sell residential property in India acquired with Reserve Bank permission?

Accepted Answer

A foreign national, whether residing in India or abroad, must obtain prior approval from the Reserve Bank before transferring, by sale, any residential property in India that was originally acquired with the Reserve Bank’s specific permission, to either an Indian resident or another foreign national.

Question 17

Under general permission, can an NRI/PIO gift their residential or commercial property?

Accepted Answer

NRI/PIO can transfer residential or commercial property in India as a gift to a person who is a resident in India, another NRI, or a PIO.

Question 18

Can a foreign national of non-Indian origin, residing in or outside India, mortgage their residential or commercial property in India to a party within or outside the country?

Accepted Answer

No, he should obtain prior approval from the RBI. However, if an immovable property is purchased by a person residing outside India who has established a Branch Office or other business presence in India in accordance with FERA/FEMA regulations, they may, under the general permission available, use the property as collateral with an authorized dealer for any borrowing.

Question 19

What are the approved methods of payment for an NRI/PIO purchasing residential or commercial property in India under the general permission?

Accepted Answer

Under the general permission available, NRIs/PIOs may acquire residential or commercial property in India using funds remitted through normal banking channels or from their NRE/FCNR (B)/NRO accounts. Payment for the property should not be made from sources outside India.

Question 20

Can refunds related to property purchases (like application money or earnest money) be credited to an NRE account in the event of non-allotment or deal cancellation?

Accepted Answer

Provided that the original payment was made through inward remittance or debited from an NRE/FCNR(B) account, no permission from the Reserve Bank is necessary. Instead, they can directly contact the Authorised Dealer for this matter

Question 21

Can NRI/PIO repatriate the proceeds from selling residential or commercial property in India? If yes, what are the limits?

Accepted Answer

NRIs/PIOs can repatriate the sale proceeds of residential or commercial property in India if it was purchased using inward remittance through standard banking channels or debited to an NRE/FCNR (B) account. The repatriation amount should not exceed the amount originally paid for the property, which can be either in foreign exchange received through normal banking channels, debited from an FCNR (B) account, or the foreign currency equivalent on the payment date from an NRE account. Sale proceeds of property purchased using an NRO account cannot be repatriated and must be credited to the NRO account instead.

Question 22

If an NRI repays a home loan using remittances or funds from an NRE/FCNR (B) account, can the sale proceeds of that property be repatriated?

Accepted Answer

Repaying a loan in foreign exchange is considered equivalent to receiving foreign exchange for purchasing residential accommodation.

Question 23

Are there restrictions on repatriating proceeds from the sale of residential property bought by an NRI/PIO with funds remitted through normal banking channels or from an NRE/FCNR (B) account?

Accepted Answer

The repatriation of sale proceeds is limited to a maximum of two residential properties.

Question 24

Can the sale proceeds of immovable property inherited by an NRI/PIO or foreign national of non-Indian origin from someone in India be remitted abroad?

Accepted Answer

Remittances up to USD one million per calendar year can be made with documentary evidence supporting inheritance and a Tax Clearance Certificate or No Objection Certificate from the Income Tax authority. However, if the Person of Indian Origin (PIO) is a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Hong Kong, Macau, or Iran, they must obtain prior approval from the Reserve Bank, along with the necessary documentary evidence of inheritance and a Tax Clearance or No Objection Certificate. Remittances are not available to citizens of Nepal or Bhutan.

Question 25

Can the sale proceeds of immovable property in India, inherited by a non-resident from another non-resident, be repatriated?

Accepted Answer

He must obtain prior approval from the Reserve Bank, providing documentary evidence to support the inheritance, and secure a clearance or no-objection certificate from the Income Tax authority.

Question 26

How is income from property sales or rentals taxed for NRI/PIO/OCI?

Accepted Answer

Simply acquiring property does not incur income tax. However, any income generated from owning it—such as rent (if the property is rented out), the annual value of the property (if it is not rented and is not the owner’s only residential property in India), or capital gains (short-term or long-term) from selling the property or a portion of it—is taxable for the owner.

Question 27

Does Capital Gains Tax (CGT) apply to NRI/PIO/OCI?

Accepted Answer

Long-term and short-term capital gains are subject to tax for non-residents.

Question 28

How does the Double Taxation Avoidance Agreement (DTAA) affect CGT paid in India concerning foreign tax obligations?

Accepted Answer

If a non-resident pays taxes on capital gains earned in India, they can typically claim a tax credit for these taxes in their home country. This is because the income earned in India is also subject to tax in their country of residence. The amount of tax credit available depends on the provisions of the Double Taxation Avoidance Agreement (DTAA) between the countries and the tax laws of the taxpayer’s home country.

Question 29

What are the Reserve Bank of India's rules on repatriating proceeds from property sales by NRI/PIO?

Accepted Answer

If the property was acquired using foreign exchange, such as through normal banking channels or by debiting an NRE or FCNR(B) account, the repatriation amount should not exceed the amount paid for the property. This applies to foreign exchange received through these channels or the foreign currency equivalent of the payment date.

For NRIs/PIOs, the repatriation of sale proceeds from residential property purchased with foreign exchange is limited to a maximum of two properties. Any capital gains should be credited to an NRO account, from which up to USD 1 million per financial year can be repatriated.

If the property was acquired using rupee sources, NRIs/PIOs may remit up to USD 1 million per financial year from their NRO account balances (including sale proceeds of inherited or settled assets) for legitimate purposes, subject to compliance with tax regulations. This facility can also be used to remit capital gains, provided the property was acquired with funds remitted through normal banking channels or debited from an NRE/FCNR(B) account.

Question 30

Is rental income from property in India repatriable, and what are the RBI rules governing this?

Accepted Answer

Rental income, as a current account transaction, can be repatriated after deducting the appropriate taxes and obtaining certification from a Chartered Accountant in practice. However, repatriation of sale proceeds must adhere to specific conditions. The repatriation amount cannot surpass the sum initially spent on acquiring the immovable property in foreign exchange.

Question 31

Are NRI/PIO/OCI eligible for housing loans from Indian banks to purchase property?

Accepted Answer

A housing loan for the acquisition of residential property in India can be provided to a non-resident Indian or a person of Indian origin living abroad by an authorized dealer or a housing finance institution approved by the National Housing Bank, provided the following conditions are met

Question 32

How does the DTAA apply to tax on income and Capital Gains tax paid in India by NRIs?

Accepted Answer

India has Double Taxation Avoidance Agreements (DTAAs) with numerous countries that offer favourable tax treatment for various types of income. However, for the sale of immovable property, most DTAAs specify that capital gains will be taxed in the country where the property is situated. Therefore, non-residents will be liable to pay tax in India on the capital gains from selling immovable property located in India. Similarly, rental income from immovable property in India is typically taxed in India according to most tax treaties, as the property is situated there.

Question 33

Can NRIs/PIOs obtain housing loans in rupees from authorized dealers or housing finance institutions in India for purchasing or renovating residential accommodation?

Accepted Answer

Subject to specific terms and conditions, these loans can be repaid by the borrower through inward remittances via standard banking channels, debiting their NRE/FCNR (B)/NRO account, or using rental income generated from the property. Additionally, repayments can be made by the borrower’s close relatives using their accounts in India to credit the borrower’s loan account.

Question 34

Can an NRI get a housing loan in rupees from their employer in India?

Accepted Answer

Yes, subject to certain terms and conditions rephrase

Question 35

Who is required to file tax returns in India?

Accepted Answer

If you’re an NRI, OCI, or PIO, you need to file your income tax returns if you meet either of the following criteria:
Your taxable income in India during the year exceeds the basic exemption limit of INR 1.6 lakh.
You have earned short-term or long-term capital gains from the sale of investments or assets, regardless of whether the gains exceed the basic exemption limit.

Please note that the increased exemption limit for senior citizens and women applies only to residents, not non-residents.

Question 36

What is the most efficient method to file tax returns in India? Are there any exceptions?

Accepted Answer

If your taxable income comes solely from investment income (such as interest) and/or capital gains income, and tax has already been deducted at source, you are not required to file a tax return.
If you have long-term capital gains from selling equity shares or equity mutual funds, you don’t need to pay any tax on those gains and, therefore, you don’t need to report them in your tax return.

Tip: You might still want to file a tax return if you’re eligible for a refund. For example, if your taxable income for the year was below INR 1.6 lakh but the bank deducted tax at source on your interest, you can claim a refund by filing a return. Another situation is if you have a capital loss that you wish to offset against capital gains. Even if tax was deducted at source on your capital gains, filing a tax return will allow you to set off (or carry forward) the capital loss to reduce your actual tax liability.

Question 37

What is the recommended way for NRIs to file tax returns in India?

Accepted Answer

Traditionally, you could file your tax return by either granting power of attorney to someone in India or by sending your forms and documents to a tax expert there to file on your behalf. Nowadays, however, the simplest method for NRIs to file their Indian tax returns is through online platforms. Several options are available for filing online.

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