The Laws Affecting NRIs

The Laws Affecting NRIs
By Gajanan Khergamker

Until some ago, investing in immovable properties for NRIs was quite an uphill task. In the days of the Foreign Exchange Regulation Act, the buying or selling of immovable property was governed by the citizenship of a person.

At present, the term Non-Resident Indian means a person residing outside India who is either a citizen of India or is a person of Indian Origin who is no longer a citizen of India. An Indian citizen who stays abroad for the purpose of employment, business or to pursue any kind of vocation outside India or under circumstances indicating an intention for an uncertain duration of stay abroad is a non-resident Indian. In addition, non-resident foreign citizens of Indian origin are treated on par with Indian NRI citizens for the purpose of many investment related facilities.

To avail of a number of facilities in India such as opening and maintenance of bank accounts or investment in shares and securities in India, the term ‘Person of Indian Origin’ means a citizen of any other country other than Pakistan or Bangladesh who,
(a) at any time has held an Indian passport;
(b) he or either of his parents or any of his grandparents was a citizen of India by virtue of the constitution of India or the Citizenship Act, 1955 (57 of 1995);
(c) is a spouse of an Indian citizen.

For investments in immovable property, a Person of Indian Origin covers the same criteria. But it also debars citizens from neighbouring countries such as Pakistan, Bangladesh, Afghanistan, Bhutan, Sri Lanka, China, Iran or Nepal to be called a ‘Person of Indian Origin’. All persons whether residing in India or outside India who are citizens of the above said countries require prior permission of the Reserve Bank of India for acquiring or transferring any immovable property in India.

A person of Indian origin residing outside India does not require permission to acquire any immovable property in India other than agricultural land, farmhouse or a plantation property by way of gift from a person who is a resident of India or a person who resides outside India but is a citizen of India or from another person who is of Indian origin but resides outside India. The same holds true in the case of inheritance too. This means that a person of Indian origin residing outside India does not require permission to acquire any immovable property in India through inheritance from another person residing outside India who had acquired such property in accordance with the provisions of the foreign exchange law in force at the time of acquisition.

Non-resident Indians and persons of Indian origin can also freely rent out their immovable property in India without seeking any permission from the Reserve Bank. The rental income being a current account transaction is freely reportable outside India.