Gopal Sharma bought 25 acres of land in Mysore in the year 1989. After two years, Gopal moved to the UK, settled there, and acquired a citizenship. Since he has no plan of coming back to India, he wants to sell this piece of land. But the question here is: does Gopal still have the right to sell the land?
So what is the procedure of selling an immovable property owned by NRIs (Non Resident Indian) in India?
Sale of immovable property in India by NRIs
Q : Can an NRI sell property in India?
A : Yes an NRI can sell a property in India to any resident Indian, or to another NRI, or to a PIO (Person of Indian Origin).
Q : Can a PIO sell property in India?
A : Yes a PIO can sell a property in India to a resident Indian only. In order to sell to another PIO or an NRI, he would need a prior approval from the Reserve Bank of India.
Q : Can an NRI / PIO owning agricultural land, a plantation property or a farm house in India sell this type of property?
A : Yes an NRI / PIO may sell such a property to a resident of India who should be an Indian citizen also.
Mortgaging a property in India by NRIs
Q : Can NRIs/ PIOs mortgage residential property in India?
A : Yes NRIs/PIOs can mortgage residential property to:
a. an authorized dealer or a housing finance institution in India without the approval of Reserve Bank
b. Any bank abroad but with the prior approval of the Reserve Bank of India
Repatriation of sale proceeds
Q : Can NRIs/PIOs repatriate the sale proceeds of properties owned in India?
A : Yes NRIs/PIOs can repatriate the sale proceeds of residential property in India. However, such a facility is not extended to citizens of Afghanistan, Pakistan, Bangladesh, Sri Lanka, China, Iran, Nepal and Bhutan.
Q : What are the limitations on repatriation of such sale proceeds?
A : The limitations on repatriation depend on the mode of acquisition of the said property.
1. In case the property was purchased through foreign exchange, wherein money is paid through the NRE / FCNR (B) Account
a. Repatriation of sale proceeds is only allowed up to a maximum of 2 residential properties
b. The amount to be repatriated should not exceed the foreign exchange equivalent of the amount paid for buying the property
2. In case the property was purchased through local funds, wherein money is paid through the NRO Account
a. Sale proceeds of properties bought using the NRO account should be credited to the NRO account only
b. Repatriation of sale proceeds is limited to a maximum of USD 1 million per financial year
3. In case the property was purchased by taking a loan in India, wherein money is borrowed from authorized dealers or housing finance institutions in India to buy the said property
a. Repatriation of sale proceeds is limited to the amount of loan repaid either by remitting money from overseas or by debiting the NRI?s / PIO?s NRE or FCNR accounts
For the purpose of investment, RBI allows NRIs and PIOs to hold three types of accounts in India:
- FCNR (Foreign Currency Non – Resident) Account – As the name suggests, such accounts can be opened only in foreign currency and not in Indian currency. These are Fixed Deposit accounts and not Savings accounts. Deposits into such accounts can be made using only select major currencies such as the US Dollar, UK Pound, Euro, Canadian Dollar, and Japanese Yen. Interest is earned on deposits made in these accounts.
- NRE (Non-Resident External) Account – These accounts, on the other hand, are rupee denominated accounts. In order to remit money to these accounts, an NRI / PIO would have to convert the foreign currency into the Indian rupee. These accounts can be in the form of Savings, Current, Recurring or Fixed Deposit.
- NRO (Non-Resident Ordinary) Account – Like NRE accounts, these accounts are also rupee denominated and can be in the form of Savings, Current, Recurring or Fixed Deposit. Any income an NRI / PIO earns in India need to be necessarily deposited in his NRO account.