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Introduction to NRI
Taxation
The income earned by any person in any country is
subject to local tax laws of that sourced country.
Therefore, tax paid in foreign country is a cost to the
depositor/investor and, hence, the tax environment, which
includes tax laws and its administration, plays an important role
in attracting foreign capital, both short-term as well as
long-term.
Axis Bank provides advisory services in connection with
Indian tax to minimize the tax liability of an NRI, who invests
in India and earns income in India
India has a well-developed tax infrastructure. Rates of
Income tax are moderate and the tax laws are moderate, which
makes it an ideal investment and business destination. Certain
special rate benefits are also given to NRI.
Who is an
NRI?
An NRI is a Non-Resident
Indian. Non-Resident Indian means
an individual, being a citizen of India or a person of Indian
origin, who is not resident. NRI is
taxed in India only on income accruing or arising in India, or
deemed to accrue or arise in India, in the relevant financial
year.
Basic
Concepts
Person: A
person includes Individual, Hindu Undivided Family, Company,
Firm, Association of Persons or Body of Individuals whether
incorporated or not, local authority and every other artificial
juridical person.
Assessment
Year: Assessment Year means the period of twelve months
commencing on the first day of April and ending on the last day
of March every year. The tax is levied, in each assessment year,
with respect to or on the total income earned by the assessee in
the previous year.
Previous Year:
Previous year means the financial year immediately preceding the
assessment year.
Assessee:
Assessee means a person by whom any tax or any other sum of money
is payable under this Act.
Tax: Tax in
relation to the assessment year commencing on the 1st day of
April, 1965, and any subsequent assessment year means income-tax
chargeable under the provisions of this Act, and in relation to
any other assessment year income-tax and super-tax chargeable
under the provisions of this Act prior to the aforesaid date.
Tax Credit
Certificate: Tax credit certificate means a tax credit
certificate granted to any person in accordance with the TDS
provisions and any scheme made there under.
Residential
Status
The taxability of an individual in India depends upon his
Residential Status under the Income-tax Act, 1961 (ITA). As per
the ITA, whether an individual is a resident or not, depends upon
his period of stay in India in the relevant financial year.
Different Residential Status under ITA:
-Resident
-Ordinarily
Resident
-Not
Ordinarily Resident
Non-Resident
Scope
of taxability of income
Resident
An individual,
who complies with the residence test as below, is a Resident of
India.
Residence Test
- An individual who stays in India in a year ending on March 31
for at least 182 days in the relevant year becomes Resident for
that year; OR
An individual, who stays in India in a year ending on March 31
for atleast 60 days in the relevant year, and for atleast 365
days during the four years immediately preceding the relevant
year, becomes Resident for that year.
Relaxation in
case of Indians - In the following cases, the period of 60 days
is extended to 182 days: An Indian
Citizen, who leaves India for employment outside India
An Indian Citizen, who leaves India as a
member of the crew of an Indian ship An Indian Citizen or a Person of an Indian Origin, who
is abroad, and who is on a visit to India in any year.
Resident and Ordinarily Resident (ROR)
An individual satisfying either of the
basic residence test and who is not an RNOR is an ordinarily
resident. An individual, which is
ROR, is taxed in India on the income received or deemed to be
received in India or accrues or arises or is deemed to accrue or
arise in India during such year or accrues or arise to him
outside India in the relevant financial year.
Resident but Not Ordinarily Resident
(RNOR)
A Resident individual satisfying any of the following
condition is Resident but Not Ordinarily Resident - An individual who is a non-resident in India in 9 out
of 10 years preceding the relevant previous year; OR
An individual staying in India for 729
days or less during 7 previous years preceding the relevant
previous year.
In other words,
a person returning from overseas to settle down in India can be
treated as "Resident But Not Ordinarily Resident" for a period of
two years after he returns to India.
An individual,
who is a RNOR, is taxed in India on the income, which accrues or
arises in India. No tax liability accrues in respect of the
income, which accrues or arises out of India.
Non-Resident
An individual, who does not satisfy any
of the Residence Test, is a "Non-Resident". An individual, who is Non-Resident, is taxed in India
on the income received or deemed to be received in India or
accrues or arises or deemed to accrue or arise in India, in the
relevant financial year.
Scope of Taxability of
Income
Depending upon
the residential status of an individual in India, the scope of
taxable income will vary as shown in the table below:
Residential
Status | Scope of
Taxability of Income |
Resident and
Ordinarily Resident | Global Income
is taxable in India |
Resident but
Not Ordinarily Resident | Global income
is taxable in India except on the income, which accrues or arises
and received outside India, unless it is derived from a business
controlled in or a profession set up in India. |
Non -
Resident | Income
accrued, arised or received or deemed to accrue, arise or receive
in India |
Salary or pension earned in India is
taxable though it may be paid in India or abroad. However, if the
pension is received by or on behalf of the employee in a foreign
country and later on remitted to India, it will be exempt from
tax in India since it is not treated as income received in
India.
NRI Services
We have a dedicated team of Associates for NRI customers as
they have unique set of queries/questions when buying property.
The team is trained on RBI laws as well as other legal aspects of
NRIs buying property in India. They bring along substantial
experience of consulting NRI customers on property purchase in
India. We help you with a reliable, transparent and hassle free
transaction and ensure that your money is safe and is in right
hands.
Frequently Asked Questions
|
Am I an NRI?
Under the Foreign Exchange Regulation Act of 1973, Non-Resident
Indians are:
- Indian citizens who stay abroad for employment or carrying on
business or vocation outside India or for any other purpose in
circumstances indicating an indefinite period of stay abroad;
OR
- Government servants who are posted abroad on duty with the
Indian missions and similar other agencies set up abroad by the
Government of India where the officials draw their salaries out
of Government resources; OR
- Government servants deputed abroad on assignments with
foreign Governments or regional/international agencies like the
World Bank, International Monetary Fund (IMF), World Health
Organisation (WHO), Economic and Social Commission for Asia and
the Pacific (ESCAP) OR
- Officials of the State Government and Public Sector
Undertakings deputed abroad on temporary assignments or posted to
their branches or offices abroad.
Who is a foreign
citizen of Indian Origin?
A foreign citizen is deemed to be of Indian Origin if : i) he
held an Indian Passport at any time or ii) he or his father or
paternal grand father was a citizen of India by virtue of the
Constitution of India or the Citizenship Act, 1955. However this
does not apply to citizens of Pakistan, Bangladesh, Afghanistan,
Bhutan, Sri Lanka or Nepal What is the
difference between carpet area, built-up and super built-up
area?
The area of an apartment or building, not inclusive of the area
of the walls is known as carpet area. This is the area that is
actually used and in which a carpet can be laid. When the area of
the walls including the balcony is calculated along with the
carpet area, it is known as built-up area. The built-up area
along with the area under common spaces like lobby, lifts,
stairs, garden and swimming pool is called super built-up
area.
|
PURCHASE |
What should a buyer keep in mind
while purchasing a residential flat?
Some of the factors to consider while purchasing a flat are:
- Locality i.e. transport, schools, hospitals, market, business
district, entertainment centres, hotels, restaurants, pollution
levels
- Quoted area of the flat i.e. Carpet, Built Up Area and super
Built Up Area
- Car parking space
- Quality of construction
- Reputation of the builder or seller
- Sufficient water and electric supply, other utilities
- Cost components : price, stamp duty, registration charges,
transfer fees, monthly outgoings and society charges, costs of
utilities
- Potential for resale or renting out of the property
- Any other distinguishing features or advantages of the
property
Checklist for buying
a residential property?- Market Trends about prevalent rates of property in the
vicinity and last known transactions
- Ask for photocopies of the all deeds of title related to the
property to be purchased. Examine the deeds to establish the
ownership of the property by seller, preferably through an
advocate. Ascertain the survey number, village and registration
district of the property as these details are required for
registration of the sale. Previous encumbrances and loans, if any
on the property must be cleared before completion of purchase of
the property. The title of the Vendor to the property must be
clear and marketable.
- Check for approved layout plan and approved building plan
with number of floors
- Clearance from Municipality, Electricity, Water, Pollution,
Lift authorities
- Check the building bye-laws in that area to verify any issue
with setback, side setback, height, etc
- Confirm transfer fees, stamp duty and registration charges to
be paid on purchase of the property as well as outgoings to be
paid for the property i.e. property tax, water and electricity
charges, society charges, maintenance charges
Do NRI's require
permission of Reserve Bank to acquire immovable property in
India?
No. NRI's do not require any permission to acquire any immovable
property in India other than agricultural / plantation property
or a farm house. Refer to the table below for a comprehensive
list of transactions possible.
| | NRI | PIO | Resident | Note | | Buy Property From | Yes | Yes | Yes | For
NRI | | Sell Property To | Yes | Yes | Yes | | Receive Gift From | Yes | Yes | Yes | | Give Gift To | Yes | Yes | Yes | | Agricultural
Property | | | | | Purchase Property
From | No | No | No | | Sell Property To | No | No | Yes | | Receive Gift From | No | No | No | | Give Gift To | No | No | Yes | | Buy Property From | Yes | Yes | Yes | For
PIO | | Sell Property To | No | No | Yes | | Receive Gift From | Yes | Yes | Yes | | Give Gift To | Yes | Yes | Yes | | Agricultural
Property | | | | | Purchase Property
From | No | No | No | | Sell Property To | No | No | Yes | | Receive Gift From | No | No | No | | Give Gift To | No | No | Yes |
In what manner the
purchase consideration for the immovable property should be paid
under the general permission?
The purchase consideration should be met either out of inward
remittances in foreign exchange through normal banking channels
or out of funds from any non resident accounts maintained with
banks in India. Is there any
restriction on the number of residential properties that may be
purchased by an NRI?
There are no restrictions on the number of residential properties
that may be bought by an NRI. However, repatriation is allowed
only in respect of two such properties. What are the
guidelines for acquisition of agricultural land / plantation
property / farmhouse by NRIs and foreign citizens of Indian
origin?
All requests for acquisition of agricultural land / plantation
property / farm house by any person resident outside India may be
made to The Chief General Manager, Reserve Bank of India, Central
Office, Exchange Control Department, Foreign Investment Division
(III), Mumbai 400 001. |
SALE & REPATRIATION |
Can such propery be sold without
the permission of Reserve Bank?
Yes. Reserve Bank has granted general permission for sale of such
property. However, where another foreign citizen of Indian origin
purchases the property, funds towards the purchase consideration
should either be remitted to India or paid out of balances in
non-resident accounts maintained with banks in India. Can sale proceeds of
such property if and when sold be remitted out of
India?
In the event of sale of immovable property other than
agricultural land/farm house/plantation property in India by a
NRI or PIO, the authorized dealer may allow repatriation of the
sale proceeds outside India, provided all the following
conditions are satisfied: -
- In the event of sale of immovable property other than
agricultural land/farm house/plantation property in India by a
NRI or PIO, the authorized dealer may allow repatriation of the
sale proceeds outside India, provided all the following
conditions are satisfied: -
- NRIs/PIOs can effect remittance of sale proceeds of immovable
property in India irrespective of the period for which the
property was held. The sale proceeds allowed to be repatriated
should, however, not exceed the foreign exchange brought in to
acquire the said property.
- In case of residential property, the repatriation of sale
proceeds is restricted to not more than two such properties, if
the property was purchased from funds held in NRE Account.
- The amount sought to be repatriated abroad should not exceed
the amount paid for acquisition of the immovable property in the
foreign exchange received through normal banking channels or out
of funds held in FCNR or NRE Account. In case of investment out
of NRE Account the amount to be calculated as foreign currency is
equivalent value as on the date of payment for acquisition of the
said property.
|
RENT & REPATRIATION |
Can NRI's/PIO's rent out the
properties (residential/commercial) if not required for immediate
use?
Yes. NRI/PIOs can freely rent out their immovable property,
whether purchase through application of forex or otherwise,
without seeking any permission from the RBI. The rental income
being a current account transaction is repatriable outside India,
only if proper tax is paid or provided for.
|
LOAN RELATED |
Does RBI have any guidelines for
loans to NRI's/PIO's?
Yes. There are guidelines issued by the by the Reserve Bank of
India for grant of Housing Loans to NRIs. The guidelines are:
- The loan amount shall not exceed 85% of the cost of the
dwelling unit.
- Own contribution, which is the cost of dwelling unit financed
less the loan amount, can be met from direct remittances from
abroad only through normal banking channels, your Non-Resident
(External) [NR (E)] Account and /or Non-Resident (Ordinary) [NR
(O)] account and /or Non-Resident Special Rupee account [NRSR] in
India.
- Repayment of the loan, comprising of the principal and
interest including all the charges are to be remitted from abroad
only through normal banking channels, your Non-Resident
(External) [NR (E)] Account and /or Non-Resident (Ordinary) [NR
(O)] account and /or Non-Resident Special Rupee account [NRSR] in
India
Can authorised dealer grant loans to NRIs for acquisition of a
flat/house for residential purposes?
Authorised dealers have been granted permission to grant loans to
NRI's for acquisition of house/flat for self-occupation on their
return to India subject to certain conditions Repayment of the
loan should be made within a period not exceeding 15 years out of
inward remittance through banking channels or out of funds held
in the investors' NRE/FCNR/NRO accounts. Can authorized dealer grant housing loan to NRI's where he is
a principal borrower with his resident close relative as a
co-applicant / guarantor or where the land is owned jointly by
such NRI borrower with his resident close relative?
Yes. Such housing loans availed in rupees can also be repaid by
the close relatives in India of the borrower. What are the documents I have to submit along with the
application?
The following documents are normally to be submitted along with
the application:
- Photocopy of the labour contract and English translation duly
countersigned by your employer
- Latest salary certificate (in English) specifying the
following:
- Name (as it appears in the passport)
- Date of joining
- Passport Number
- Designation
- Perquisites and salary
- Photocopy of labour card/identity card
- Photocopy of valid resident visa stamped on the passport
- Photocopy of monthly statement of local bank account for the
last 4 months
- Property related documents
Can an NRI take loan against the security of immovable
property in India? Are there any restrictions on the use of loan
amount?
An NRI can borrow against the security of immovable property from
Authorised Dealer subject to following conditions:
- The loan should be used for meeting the personal requirements
or for borrower's own business purposes; and
- Loan should not be used for prohibited activities, namely;
- Business of chit fund, or
- Nidhi Company, or
- Agriculture or plantation activities or in real estate
business, or construction of farm houses, or
- Trading in Transferable Development Rights (TDRs),
- The loan amount cannot be remitted outside India,
- Repayment of loan shall be made from out of remittances from
abroad or by debit to NRE/FCNR/NRO account or out of the sale
proceeds of shares or securities or immovable property against
which such loan was granted.
|
Registered Office: Tamanna Realtors
Pvt. Ltd.
15/7 , Sarva Priya Vihar, New Delhi -
110 016 INDIA
Ph: +91 11 65693253/2/0
+91 11 26536049/65
Tel/Fax : +91 11 26521816 Website :
www.assetventures.in
BranchOffice : Tamanna
Realtors Pvt. Ltd.
B 103 Chitranjan Park First Floor New
Delhi 110019
Ph: +91 11 26271786
/40562170/32423249
Tamanna Realtors
Pvt. Ltd.
413 International Trade Tower Nehru
Place New Delhi 19
Ph: +91 11 46539337/8/9/40
Email: contacts@indiaproperties4u.com
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