Whether immovable property in India can be acquired by way of gift ?

1. Yes, NRIs and PIOs can freely acquire immovable property by way of gift either from i) a person resident in India orii) an NRI oriii) a PIO.However, the property can only be commercial or residential. Agricultural land / plantation property / farm house in India cannot be acquired by way of gift.
2. A foreign national of non-Indian origin resident outside India cannot acquire any immovable property in India through gift.

Can an office of a foreign company purchase immovable property in India?

A foreign company which has established a Branch Office or other place of business in India, in accordance with FERA / FEMA regulations, can acquire any immovable property in India, which is necessary for or incidental to carrying on such activity. The payment for acquiring such a property should be made by way of foreign inward remittance through proper banking channel. A declaration in form IPI should be filed with Reserve Bank within ninety days from the date of acquiring the property. Such a property can also be mortgaged with an Authorised Dealer as a security for other borrowings. On winding up of the business, the sale proceeds of such property can be repatriated only with the prior approval of Reserve Bank. Further, acquisition of immovable property by entities who had set up Branch Offices in India and incorporated in Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan would require prior approval of Reserve Bank to acquire such immovable property. However, if the foreign company has established a Liaison Office, it can not acquire immovable property . In such cases, Liaison Offices, can take property by way of lease not exceeding 5 years.

Can a foreign national of non-Indian origin resident outside India purchase immovable property in India?

No. A foreign national of non-Indian origin, resident outside India cannot purchase any immovable property in India. But, he/she may take residential accommodation on lease provided the period of lease does not exceed five years.

Acquire, Sale or Gift Agricultural Land

Whether NRI/PIO can acquire agricultural land/ plantation property / farm house in India?

No. Since general permission is not available to NRI/PIO to acquire agricultural land/ plantation property / farm house in India, such proposals will require specific approval of Reserve Bank and the proposals are considered in consultation with the Government of India.


Can an agricultural land / plantation property / farm house in India owned / held by a non-resident be sold?

NRI / PIO may sell agricultural land /plantation property/farm house to a person resident in India who is a citizen of India.

Foreign national of non-Indian origin resident outside India would need prior approval of Reserve Bank to sell agricultural land/plantation property/ farm house in India

Can an NRI / PIO / Foreign national holding an agricultural land / plantation property / farm house in India gift the same?

NRI / PIO can gift but only to a person resident in India who is a citizen of India.

Foreign national of non-Indian origin needs prior approval of Reserve Bank

Can a person who had bought immovable property when he was a resident, continue to hold such property even after becoming an NRI/PIO?

Yes, he can continue to hold the residential / commercial property / agricultural land/ plantation property / farm house in India without the approval of the Reserve Bank

Who can purchase immovable property in India?

Under the general permission available, the following categories can freely purchase immovable property in India:

1. Non-Resident Indian (NRI)- that is a citizen of India resident outside India
2. Person of Indian Origin (PIO)- that is an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan),

who at any time, held Indian passport, or

who or either of whose father or grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).

The general permission, however, covers only purchase of residential and commercial property and not for purchase of agricultural land / plantation property / farm house in India.

Acquisition and Transfer of Immovable Property in India by a person resident outside India

Acquiring immovable property in India by persons resident outside India is regulated in terms of Section 6(3) (i) of the Foreign Exchange Management Act (FEMA), 1999 as well as by the regulations contained in Notification issued by RBI viz Notification No FEMA. 21/2000-RB dated May 3, 2000, as amended from time to time. The persons resident outside India are categorized as Non- Resident Indians (NRIs) or a foreign national of Indian Origin (PIO) or a foreign national of non-Indian origin. A person resident in India who is not a citizen of India is also covered by the relevant Notifications.

Statutorily, under the provisions of Section 6(5) of FEMA 1999, a person resident outside India can hold, own, transfer or invest in Indian currency, security or any immovable property situated in India if such currency, security or property was acquired, held or owned by such person when he was a resident in India or inherited from a person who was a resident in India.

The regulations under the Notification No FEMA 21 dated May 3, 2000 permit a NRI or a PIO to acquire immovable property in India other than agricultural land or, plantation property or farm house. Further, foreign companies who have been permitted to open an office in India are also allowed to acquire any immovable property in India, which is necessary for or incidental to carrying on such activity. This stipulation is not available to entities which are permitted to open liaison offices in India.

The relevant regulations covering the transactions in immovable property have been notified vide RBI Notification No.FEMA 21/2000-RB dated May 3, 2000 and this basic notification has been subsequently amended by the notifications detailed below:
Notification No.FEMA 64/2002-RB dated June 29, 2002;
Notification No.FEMA 65/2002-RB dated June 29, 2002;
Notification No.FEMA 93/2003-RB dated June 9, 2003; and
Notification No. FEMA 146/2006-RB dated February 10 2006 (available with A.P.(DIR Series) Circular No. 5 dated 16.8.2006 on website)

The restrictions on acquiring immovable property in India by a person resident outside India would not apply where the immovable property is proposed to be acquired by way of a lease for a period not exceeding 5 years or where a person is deemed to be resident in India. In order to be deemed to be a person resident in India, from FEMA angle, the person would need to comply with the criterion for residency as defined in Section 2(v) of FEMA 1999. However, citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan cannot acquire or transfer immovable property in India, (other than on lease, not exceeding five years) without prior permission of the Reserve Bank.

NRIs/PIO are allowed to repatriate an amount up to USD one million, per financial year (April-March), out of the balances held in the NRO account subject to tax compliance. This amount includes sale proceeds of assets acquired by way of inheritance or settlement.

While the statutory and regulatory provisions are indicated above, we have been receiving several queries from individuals on operational procedures regarding acquisition, holding and transferring of immovable property in India and repatriating/remitting the proceeds arising from sale of such property. In order to clarify these issues, we have attempted a set of FAQs on various issues relating to acquisition and transfer of immovable property in India by a person resident outside India and a person resident in India who is not a citizen of India.

In case there are other issues to be resolved, a reference may be made to the

Chief General Manager-in-Charge
Foreign Exchange Department Foreign Investment Division
Reserve Bank of India
Central Office Mumbai- 400 001.

International Taxation

The Indian Income-tax Act provides for levy of income-tax on the income of foreign companies and non-residents, but only to the extent of their income sourced from India. Under section 5 of the Act, a foreign company or any other non-resident person is liable to tax on income which is received or is deemed to be received in India by or on behalf of such person, or income which accrues or arises or is deemed to accrue or arise to it in India. Section 9 thereafter specifies certain types of income that are deemed to accrue or arise in India in certain circumstances. These two sections embody the source rule of income taxation in the domestic law. No income of a non-resident can be taxed in India unless it falls within the four corners of section 5 read with section 9 of the Income-tax Act.

Broadly speaking, business income of a foreign company or other non-resident person is chargeable to tax to the extent it accrues or arises through a business connection in India or from any asset or source of income located in India, and to the extent such income is attributable to the operations carried out in India. Income in the nature of salary is taxable in India if it is earned for services rendered in India. Income in the nature of interest, royalty and fees for technical services is taxable in India, if such income is received from the Government; or from a person resident in India except where such income is connected with a business or profession carried on outside India or with any other source of income outside India. Income in the nature of interest, royalty and fees for technical services received from a non-resident is also taxable in India if it is connected with a business or profession carried on in India or with any other source of income in India.

The Income-tax Act contains a number of special provisions relating to income of non-residents, including provisions under section 10 of the Act exempting certain categories of income. It also contains provisions prescribing a presumptive basis of taxation of certain types of income, so as to simplify the computation of income and tax in cases where the nature of activity makes such computation difficult. The Act also requires deduction of tax at source from certain types of income, and for withholding tax on all chargeable income remitted outside India.

This source-based taxation often gives rise to the problem of double taxation, where the same income could be taxed twice - in India, and also in the country of residence of the taxpayer. India has entered into Double Tax Avoidance Agreements (DTAAs) with a large number of countries, to resolve this problem. Essentially, these DTAAs lay down the extent to which one country has a right to tax income of a resident of the other country that is sourced from the first-mentioned country. The Governments of the two countries, having regard to the source rules contained in their respective domestic laws, have negotiated this extent. The Income-tax Act provides that the provisions of such a DTAA, if they are more favourable to a taxpayer, will override the provisions of the domestic tax law.

With a view to impart certainty of taxation in the cases of non-residents, a mechanism for obtaining timely advance rulings on the tax implications of transactions undertaken or proposed to be undertaken by them, is available. Applications for obtaining such rulings, which are binding on the tax department as well as the taxpayer, can be made to an independent judicial body, namely, the Authority for Advance Rulings.A